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Donation In Kind Is Not Considered Under Section 80-G

Monday, November 22, 2010
By Anand Tibrewala

My son got married recently. On the wedding day, he received various gifts totaling to Rs 68,000/-. Please throw some light on whether this amount is tax exempt or is it taxable?
-A.N.Saxena, Thane  
Ans: In your question you have not indicated whether the gift received, were from persons related to you or not related to you. However, I assume that the gifts received, were from non related persons. Under section 56, gift from non related persons are exempt up to Rs 50,000/- in one financial year. Any amount in excess of Rs 50,000/- would be taxable. Hence Rs 18,000/- would be taxable in the hands of your son who is the recipient of the gift. 
I had bought a house property in Mumbai, some years ago with the help of a housing loan from a Bank. In the current year I have been transferred out of Mumbai by my employer. Hence, I have rented out the house owned by me in Mumbai. I am likely to pay total interest of Rs 3.60 Lakhs on this housing loan in the current year. Please advice how much interest would be allowed to be deducted out of my income i.e. Rs 1,50,000/- or the full interest paid by me.
-J.T.Sen, Chembur  
Ans: Interest paid for a self occupied house property is restricted to Rs.1,50,000/-. However, if a property is rented or leased during the year then it does not remain a self occupied property. Hence, the entire interest paid during the year can be claimed as deduction. Therefore, total interest of Rs 3.60 lakhs would be allowed to be deducted out of your income in the current year. 
Q-3) During the recent floods, I had purchased a large quantity of clothes and gave the same to the flood victims through a NGO. I have the official bills for the purchase of the clothes. Can I claim expenditure for the same? Alternatively can I claim this as donation under section 80-G?
-F.G.Dutta, Dadar  
Ans: It is a noble cause to donate articles to flood victims. However, the cloth purchased by you is not an incidental activity to your business; the expenditure would not be allowed as business expenditure. This expense would not be allowed as a donation, since donation in kind is not considered under section 80-G.
(The Author is a CA and specializes in taxation matters. He is a Senior Partner at the leading Chartered Accountancy firm, AD & Company)
If you have any Tax Query email it to us at "> and we will find you a solution.

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