Should Classmates Make Payment in one Classmate Account for helping a Lady who lost his Account?

In a google-group, there was a question about the correctness of all course mates following a tradition of sending money to the bank account of one course mate and then gifting it to another course mate's child on her wedding anniversary, helping a lady when a course mate had passed away or general gifting to other course mates on special occasions. A large number of the members of the google group thought   it to be correct and as something which is being routinely done by so many course groups. 

My take on it, posted there, is as follows. It is a bit long but will save a huge heart and cash burn for those who are contemplating doing it.

 

Before anything, please remember that if somebody or some people (course mates included) have been doing something for years and there has been no objection on it from the tax guys, it neither acquires a legitimacy nor can it be quoted as a precedence – latter will be a humpty-dumpty case of '…and we all fall down!'.

 

So please be very careful and do not accumulate money of all course mates with one course mate for gifting for an occasion – the poor guy could run into a decent amount of tax payment. As far as 'intentions' in Income Tax (let's call it IT) is concerned, this 'feature' doesn't exist especially where the rules have been carefully laid down. 

So, what are those rules?

 

I'm quoting them straight from the IT Dept's tutorial on this (to avoid people bringing in ifs and buts), available at https://incometaxindia(dot)gov(dot)in. Please read it carefully and do not fall foul of it because, if you do, at the best you will have a lot of explanation to do over an extended period of time and at the worst, will have a lot of tax to pay in a short period of time. I wouldn't like to get in any of such situation anyway myself personally.

 

So the points that I'm quoting from the IT Dept advisory are as follows:-

1.       If the following conditions are satisfied then any sum of money received without consideration (i.e., monetary gift may be received in cash, cheque, draft, etc.) by an individual/ HUF will be charged to tax:

a.       Sum of money received without consideration.

b.       The aggregate value of such sum of money received during the year exceeds Rs. 50,000.

2.       Cases in which sum of money received without consideration, i.e., monetary gift received by an individual or HUF is not charged to tax: In following cases, monetary gift received by an individual or HUF will not be charged to tax:- [As amended by Finance Act, 2022] 1)

a.       Money received from relatives. Relative for this purpose means in case of an Individual: a. Spouse of the individual; b. Brother or sister of the individual; c. Brother or sister of the spouse of the individual; d. Brother or sister of either of the parents of the individual; e. Any lineal ascendant or descendent of the individual; f. Any lineal ascendant or descendent of the spouse of the individual; g. Spouse of the persons referred to in (b) to (f).

b.       Money received under will/ by way of inheritance.

c.       Money received in contemplation of death of the payer or donor.

d.       Money received from a local authority [as defined in Explanation to section 10(20) of the Income-tax Act].

e.       Money received from or by a trust or institution registered under section 12A, 12AA or section 12AB [w.e.f. AY 2023-24, this exemption is not available if a sum of money is received by a specified person referred to in section 13(3)].