No,your taxable income does not get reduced by giving a gift to anyone.So his taxable income will remain Rs 15 lakhs but Rs 5 lacs given as gift will not be taxed in the hands of his married daughter and son as they are his relatives.However,even if he gives a gift to a non relative of this amount,the gift will be taxed in recepient's hands but his taxable income will remain Rs 15 lacs.Pl remember one thing - The donor's tax liability is NEVER reduced by giving a gift,whosoever the recepient.Whether the amount will be taxed in the hands of the recepient or not is a different question entirely.It depends on whether the recepient is a relative or if not,whether the total amount received by him as gift exceeds Rs 50,000 or not for the year.
