Personal Finance

Tax Query: Does a mother pay tax on money received from NRI son?

Sanjiv Chaudhary | Updated on June 12, 2021

My son is working in the Netherlands and sends me €300 every month. My son pays income tax on his salary there. I used to send him €2,400 from India every month during his higher education in the Netherlands for almost two years. Is the money I receive from my son every month taxable in India? My existing income falls under 20 per cent tax bracket.


As per provisions of section 56 (2)(x) of the Income-tax Act, 1961 (‘the Act’), income tax is payable on any sum of money (if aggregate value exceeds ₹50,000) received by an individual without consideration. However, any receipts from specified relatives (includes lineal ascendant or descendant of the individual), would not be considered as taxable. Hence, a gift of money from your son (who is your lineal descendant) will not be subject to tax in your hands in India.

I got only one folio with Sundaram MF i.e. Diversified Equity Fund. The fund had declared a dividend of ₹725 and deducted tax at the rate of 20.8 per cent. On taking up the matter with them they stated that timings and frequency and amount of dividend declared is not known in advance. They also said that the investment horizon of the investor is unknown and actual dividend income accrued for such TDS cannot be assessed. The fund-house also said the threshold limit of ₹5,000 has been aggregated at PAN level across all AMCs and Sundaram MF does not have investor level data of dividends being declared for each PAN during a year. So, they will deduct TDS from each dividend declared even without reaching the ₹5,000 threshold. In case of total TDS exceeding the actual tax liability of any investor, he/she can claim refund while filing income tax returns. I feel the explanation given by Sundaram is patently absurd. If all MFs take this stand, and deduct tax irrespective of the amount of dividend, what is the sanctity of the threshold limit of ₹5,000. In my view, they should aggregate the dividend under their schemes alone and deduct tax if it exceeds ₹5,000 and not otherwise. Please give your considered opinion on this subject.

Cyril Dsouza

As per provisions of section 194K of the Income-tax Act, 1961 (‘the Act’), payers (MF house in this case) are required to deduct tax at source (TDS) at 10 per cent for payments made to resident individuals. However, if the amount of such income paid during financial year (FY) to the payee does not exceed ₹5000, tax is not required to be deducted at source. Literal reading of the section suggests that no TDS is to be deducted by the payer if amount paid by them during a FY does not exceed ₹5,000. However, practically some payers take a view that the threshold limit of ₹5,000 is to be considered qua the individual (i.e. at PAN level) and necessary TDS to be done. In such a scenario, individual would have to claim credit of such TDS in the return of income. Also it is important to note that, as per provisions of section 206AA of the Act, in case you do not provide your PAN to the payor, then tax is required to be deducted at a rate of 20.8 per cent (including applicable cess). If this holds true for your case, this may be reason for the MF house to deduct tax at the rate of 20.8 per cent.

The writer is a practising chartered accountant

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Published on June 12, 2021

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