Curated By: Business Desk
Last Updated: September 07, 2023, 12:28 IST
The Income Tax Department has provisions for offering tax exemptions on gifts.
It’s worth noting that the Rs 50,000 exemption limit doesn’t offset the total if the gift amount exceeds this threshold.
Every parent aspires to offer their children quality education. For those with the means, sending their children abroad for studies is an ideal choice for them. One who sends money every month abroad to support their daughter’s education should know these tax implications. Educational expenses paid within the country in many countries, often qualify for tax exemptions.
Now, do these same tax benefits extend to funds sent abroad for educational endeavours? As explained by tax expert Sandeep Jain, when you send money to your children or any family member studying abroad, it is considered a gift. The Income Tax Department usually has provisions for offering tax exemptions on gifts, subject to specific limits.
According to the Income Tax Department’s guidelines, gifts up to Rs 50,000 within a single financial year enjoy tax exemption. It means the recipient doesn’t have to pay any taxes up to this limit, whether given as a lump sum or in multiple transactions. If the gift surpasses the Rs 50,000 threshold, the surplus amount will be considered part of the recipient’s income. The taxes will be calculated based on their applicable tax rate. Importantly, it’s worth noting that the Rs 50,000 exemption limit doesn’t offset the total if the gift amount exceeds this threshold.
The question is whether the daughter will be required to pay taxes on the significant sum sent by her parents to support her overseas education. One can find the answer to this question on both the Income Tax Department’s official website and within the tax legislation. Notably, the Income Tax Department offers gift exemptions for specific familial relationships.
As per the provisions of the Income Tax Act, a father’s financial support to his children, including funding their education abroad, is regarded as a special relationship exempt from income tax. This means that the money you send to facilitate your daughter’s overseas education remains untaxed. Additionally, you are allowed to send up to Rs 2.5 lakh to relatives abroad within a financial year, and this sum also remains free from income tax obligations.
