My father needed to be hospitalized in July 2024 attributable to a mind stroke; he was within the ICU after surgical procedure for a month, after which as soon as he grew to become steady, we transferred him to a stroke rehabilitation centre, the place he was admitted for an extra four-and-a-half months. Because the mixed price of the surgical procedure, hospital keep and rehab centre keep was excessive and the insurance coverage was exhausted early, we needed to begin crowdfunding. We acquired the next funds:
1. My mom (non-earning) acquired ₹5 lakh from my uncle (her elder brother). I acquired ₹5 lakh from my maternal grandmother and ₹1 lakh from my aunt (spouse of my mom’s youthful brother). I perceive these quantities can be exempted from revenue tax beneath Part 56 (2). Is that proper?
2. I additionally acquired ₹3,55,519 from different folks (my pals and mom’s pals, etc.). Would this come beneath ‘Revenue from Different Sources’?
All the cash was exhausted within the hospital and stroke rehab centre, and presently, we live from paycheck to paycheck.
-Navodit Sudhir.
Any quantity acquired with out consideration from a relative wouldn’t be taxable and is particularly exempt beneath part 56(2)(x) of the Revenue Tax Act, 1961. In respect of your mom, quantities acquired from her brother can be thought-about as these acquired from a relative and would, due to this fact, not be taxable. In your case, the quantity acquired out of your maternal grandmother, in addition to the spouse of your mom’s brother, would even be thought-about as acquired from kin and would due to this fact not be taxable.
In respect of the quantities acquired from your mates and your mom’s pals, these might be thought-about as taxable in your palms as they aren’t acquired from kin. Whereas one might have taken a view that quantity acquired with a transparent situation for spending for a specific goal shouldn’t represent revenue within the palms of the receiver, a latest ITAT resolution has held that such crowdfunded quantity acquired is taxable within the palms of the recipient beneath part 56(2)(x). The ITAT resolution was based on the truth that there was a mixing of the funds raised from crowdfunding with private funds, and that the funds weren’t totally utilised for the aim for which they have been raised. Accordingly, when you’ve got acquired the funds in a separate checking account, which is then used to incur the hospital and rehabilitation expenditure, or if you happen to can clearly substantiate the hyperlink between the funds acquired and the quantities incurred, you might be able to distinguish your case from the information on this ITAT case. It might be potential to argue that the funds have been acquired for spending for a selected goal, have been spent for that goal, and that you just have been merely a channel for paying the funds on behalf of the contributors. Alternatively, one can even contemplate claiming a deduction for the hospital bills incurred out of the quantities acquired, on the bottom that incurring these bills was the situation for receiving the crowdfunding quantities.
Nevertheless, the matter is extremely debatable. Subsequently, it will be mandatory so that you can keep paperwork to substantiate that the quantities have been acquired with the duty to spend on hospitalisation and rehabilitation.
Mahesh Nayak, chartered accountant, CNK & Associates.
