Tax Query: How much money can be gifted to parents under IT laws?

I want a HUF in my name. Who is eligible to contribute to it? Can I add money by cheque to the HUF in my name? 

HUF means Hindu Undivided Family. The head of a HUF is called the Karta. He is the senior-most male member of the family. HUF consists of a common ancestor and all of his lineal descendants, including their wives and unmarried daughters. Only your family members can contribute to HUF. 

Once the HUF is formed, it must be formally registered in its name. A HUF should have a legal deed. The deed shall contain details of the members and the business of the HUF. Also, a HUF has to apply for a PAN, and a bank account should be opened in the name of the HUF. The identity of the HUF is distinct from his Karta and other family members. So, that means, you can contribute to HUF by issuing a cheque in the HUF’s name.

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I want to gift money to both my parents, who are 81 and 76 years, respectively. How much money can I gift them? What will happen to the funds after their demise? What are the tax implications in such an event?

There is no restriction on the amount of money you can gift your parents under the Income Tax Laws of India. However, any income earned from such money, if invested by your parents, will be taxable as per the clubbing provisions.

In the event of the death of your parents, the money will be inherited by you or transferred to you through a will. In both scenarios, there will be no tax implications on such income.

For any clarifications/feedback on the topic, please contact the writer at komal.chawla@cleartax.in