Meaning of Income to include gift of money and or property under Income Tax Act 1961: Section 56(2) (vii)

Taxation of Gift Income under Income Tax Act and Meaning of different terms used in section 56(2)(vii) of the Income Tax Act, 1961. Section 56(2)(vii) is applicable on the gift  from any person or persons on or after the 1st day of October, 2009, So for any gift taken before this period will be covered under section 56(2)(vi).

Applicability: Section 56(2)(vii) is applicable for gift received by Individual & HUF.

Receipt or Gift Limit: Total receipts in previous year, from any person or persons exceeding Rs 50000/– will be taxable under the head income from other sources, subject to exemption covered under section 56(2)(vii) like receipt from relative or receipt on the occasion of the marriage or receipt under a will or by way of inheritance will exempted from income tax.

Income to include gift of money and or property: Coverage of Gift/Receipts without or with consideration

1. Any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees during the previous year
2. Any immovable property received without consideration, the stamp duty value of which exceeds fifty thousand rupees
3. Any immovable property received for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration
4. Any property, other than immovable property received without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property
5. Any property, other than immovable property received for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration

Exempted/Non Taxable Gift Receipt under Income Tax Act

1. from any relative; or
2. on the occasion of the marriage of the individual; or
3. under a will or by way of inheritance; or
4. in contemplation of death of the payer or donor, as the case may be; or
5. from any local authority as defined in the Explanation to clause (20) of section 10; or
6. from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or
7. from any trust or institution registered under section 12AA.

Reference: – As Per Section 56) (2) (vii) Of the Income Tax Act 1961

(1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head “Income from other sources”, if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E.

(2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head “Income from other sources”, namely:—

(i) where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009,—

(a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum;

b) any immovable property, without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;

The following sub-clause (b) shall be substituted for the existing sub-clause (b) of clause (vii) of sub-section (2) of section 56 by the Finance Act, 2013, w.e.f. 1-4-2014 :

(b) any immovable property,—

(i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;

(ii) for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration:

Provided that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of this sub-clause:

Provided further that the said proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by any mode other than cash on or before the date of the agreement for the transfer of such immovable property;

(c) any property, other than immovable property,—

(i) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property;

(ii) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration :

Provided that where the stamp duty value of immovable property as referred to in sub-clause (b) is disputed by the assessee on grounds mentioned in sub-section (2) of section 50C, the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of section 50Cand sub-section (15) of section 155 shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of sub-clause (b) as they apply for valuation of capital asset under those sections :

Provided further that this clause shall not apply to any sum of money or any property received—

(a) from any relative; or

(b) on the occasion of the marriage of the individual; or

(c) under a will or by way of inheritance; or

(d) in contemplation of death of the payer or donor, as the case may be; or

(e) from any local authority as defined in the Explanation to clause (20) of section 10; or

(f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or

(g) from any trust or institution registered under section 12AA.

1. —For the purposes of this clause,—

(a) “Assessable” shall have the meaning assigned to it in the Explanation 2 to sub-section (2) of section 50C;

(b) “Fair market value” of a property, other than an immovable property, means the value determined in accordance with the method as may be prescribed;

(c) “Jewellery” shall have the meaning assigned to it in the Explanation to sub-clause (ii) of clause (14) of section 2;

(d) “property” means the following capital asset of the Assessee, namely:—

(i) immovable property being land or building or both;

(ii) shares and securities;

(iii) jewellery;

(iv) archaeological collections;

(v) drawings;

(vi) paintings;

(vii) sculptures;

(viii) any work of art; or

(ix) bullion;

(e) “relative” means,—

(i) 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 descendant of the individual;

(F) any lineal ascendant or descendant of the spouse of the individual;

(G) spouse of the person referred to in items (B) to (F); and

(ii) in case of a Hindu undivided family, any member thereof;

(f) “stamp duty value” means the value adopted or assessed or assessable by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property;

(iia) in the case of income in the nature of family pension, a deduction of a sum equal to thirty-three and one-third per cent of such income or fifteen thousand rupees, whichever is less.

1. —For the purposes of this clause, “family pension” means a regular monthly amount payable by the employer to a person belonging to the family of an employee in the event of his death ;

(iii) any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income;

(iv) in the case of income of the nature referred to in clause (viii) of sub-section (2) of section 56, a deduction of a sum equal to fifty per cent of such income and no deduction shall be allowed under any other clause of this section.