How Much Can you Loan a Family Member?
This is a purely subjective matter. If you’ve got the financial means, you may want to reckon giving money to family members with no strings attached. For this financial year, family members can lend as much as they like as an individual without triggering gift tax laws.
Loan to Family member Tax Implications India
Does any loan to a family member confers upon tax implications?
It’s important to note that for family members, there are no tax implications of gifts and loans of any kind or amount as such. However, any non-relative or friend can give you a gift/money up to Rs. 50,000 only and anything beyond that surely are taxable.
The biggest concern here is the Gift Tax not the income tax.
The only answer is that the family member receiving the gift will only pay income tax on income earned from investments with the gift. If the gift/cash is spent rather than invested, the family member will not pay any income tax.
The Gifter not the recipient has the bigger worries.
In the United States of America, we have a Unified Estate Tax and Gift Tax system (the “Unified System”) which is separate from the income tax system. Under the Unified System the tax is imposed on the decedent or the gifter, not the recipient unless some special agreement is in place between the gifter and the recipient.
Also Read: Surprise Your Family with a New Car with Home Credit Personal Loan
The Unified System currently has an “Annual Exclusion” of $15,000 per person which is indexed for inflation. The Unified System allows unlimited transfers and gifts between spouses. The Unified System also has a lifetime credit currently equivalent to $5,340,000 (indexed for inflation). If you gift more than the $15,000 Annual Exclusion, you will dip into the lifetime credit. You will need to file a Form 709 Gift Tax Return to inform the IRS of how much of the Lifetime credit you are using.
Under the right circumstances, with proper planning I could see you gifting $15,000,000 or more to the family member without paying Gift tax. And if they blew it all gambling, they would never pay any income tax on it.
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