In a recent ruling, the Income Tax Appellate Tribunal (ITAT) clarified that a Rs 20 lakh gift received by a taxpayer from his Non-Resident Indian (NRI) brother is exempt from taxation. The Mumbai bench, led by Accountant Member Prashant Maharishi, determined that the gift falls under the category of non-taxable income as the recipient and donor are close relatives.
The tribunal emphasized that gifts from a brother are not subject to tax, provided the recipient can prove the donor’s identity, creditworthiness, and the genuineness of the relationship. “The amount of Rs 20,00,000 received by the assessee clearly shows that this is not income but a gift from a close relative,” the bench noted, directing the Assessing Officer to remove the Rs 20 lakh addition from the taxpayer’s total income.
This decision was in response to an appeal by the taxpayer against an earlier order by the National Faceless Appeal Centre (NFAC) concerning the 2021-22 assessment year. The taxpayer, a trader in plastic granules, had declared a total income of Rs 19.88 lakh in his 2022 tax return. However, the Central Processing Centre (CPC) computed his income at Rs 40.29 lakh, including the Rs 20 lakh gift as taxable income.
After his rectification request was rejected by the Assessing Officer, and subsequently dismissed by the NFAC, the taxpayer appealed to the ITAT. The tribunal, after reviewing the documentation, including cheques from the donor’s NRE Savings Bank Account, confirmed the legitimacy of the gift and instructed the Assessing Officer to delete the Rs 20 lakh addition, thereby allowing the appeal.
This ruling underscores the importance of substantiating the source and nature of gifts, especially those from close relatives, in tax assessments.
Source: Indian Express
