Photo: iStock
Photo: iStock

NRI tax query: Repayment of loan between brother and sister is not taxable

Transfer of money to your sister and vice- versa will not be subject to tax in India, as there is no gift tax in india

I want to return some money to my sister, which I had borrowed some years ago. If I deposit this amount in her non-resident ordinary or NRO bank account, will it be taxed for her?—Akhil Verma

Repayment of loan between brother and sister does not have any tax implications. However, transfer of money to an individual without any consideration will amount to a gift in the hands of the recipient. There is no gift tax in India. However, income tax is payable on any sum of money, movable property or immovable property received by an individual without consideration (that is, without a quid pro quo), except gifts received from a relative. Under the income tax law, the term “relative" includes (i) spouse, (ii) brother or sister, (iii) brother or sister of the spouse, (iv) brother or sister of either of the parents, (v) any lineal ascendant or descendant, (vi) any lineal ascendant or descendant of the spouse, and (vii) spouse of the person referred to in clauses (ii) to (vi).

Therefore, transfer of money to your sister and vice- versa will not be subject to tax in India.

I want to donate about 20,000 every month to a registered NGO in India, from my account in a German bank. Can I claim tax deduction on this amount?—Atulya Kamath

As per Section 80G of the Income-tax Act, 1961, an individual may claim deduction of donation made from taxable income (excluding long-term capital gains under Section 112/112A or short-term capital gains under Section 111A), subject to certain conditions.

The contribution should be made to charitable institutions, funds, etc. referred in Section 80G. You may check whether or not the institution or fund is registered for claiming deduction under Section 80G here:

No deduction is allowed for donation made in kind. If donations are made in cash, no deduction is allowed for any amount exceeding 2,000.

Under the Income-tax law, depending upon the type/registration of institution or funds, the deduction amount may vary as per the following: (a) 100% of donation amount without qualifying limit; (b) 50% of donation amount without qualifying limit; (c) 100% of donation amount with qualifying limit; (d) 50% of donation amount with qualifying limit. The qualifying limit is 10% of the adjusted gross total income which may be calculated as follows: Gross total income (excluding exempt income); minus income on which tax is not payable under any provisions of the Act (for example, share of income from Association of Persons); minus deductions claimed under other Sections except under Section 80G.

Generally, most of the institutions, NGOs are covered under “50% of the donation amount with qualifying limit".

Assuming in your case, the NGO in India is covered under “50% of the donation amount with qualifying limit", you may be eligible for deduction for donation, lower of the following: (a) 50% of the donation amount; (b) 50% of the 10% of the adjusted gross total income.

Further, in order to claim the deduction, you must keep in record the receipt of donation. You would also be required to furnish the below details while filing tax returns In India: name and address of donee; PAN (permanent account number) of donee; amount of donation.

Accordingly, you may claim deduction for donations made from your German bank account subject to the conditions mentioned above.

For full answers, go to www.livemint.com/askmintmoney

Sonu Iyer is tax partner and people advisory services leader, EY India

Queries and views at mintmoney@livemint.com

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