Taxation and Myth related to Gifts Received in India
Myth: Gifts are not subject to Income Tax in India
False: Many individuals are under perception that gifts are free from tax. But in reality, gifts costing above Rs. 50,000 rupees are taxable. Previously gifts were tax-exempt and to reduce tax liability people used to pay money to someone they owe in the form of gifts, but now gifts in any form will be taxed according to their monetary value. Gifts received in kind are also chargeable to tax. So total gifts (Cash & Kind) received from non relatives during the financial year will exempted for value of Rs 50,000/- and above that it will be taxable under the head “Income from Other Sources”. But Gift Received from relative will be exempted from Income Tax.
The new provisions are described as under:
I. If any sum of money received without consideration, the aggregate of which exceeds Rs.50, 000, the whole of such sum will be chargeable.
II. If any immovable property received –
(a) without consideration, the stamp duty value of which exceeds Rs.50,000, the stamp duty value of such property will be chargeable.
(b) For a consideration, which is less than stamp duty value of property by an amount exceeding Rs.50,000/- the stamp duty value of such property as exceeds such consideration will be chargeable.
III. if any property other than immovable property received –
(a) without consideration, the aggregate fair market value (FMV) of which exceeds Rs.50,000, the whole of aggregate FMV of such property will be chargeable.
(b) For a consideration, which is less than the aggregate FMV by an amount exceeding Rs.50, 000, the aggregate FMV as exceeds such consideration will be chargeable.
However any such gifts received from relatives shall not be treated as income.
Gifts exempt from Tax:
- Gifts received on the occasion of marriage (Note Gift Received before marriage like on Mahendi, Sangeet or engagement ceremony will be taxable)
- Gifts received from parents and grandparents, Gift received by a daughter-in-law from her parents-in-laws or Relatives as defined
- Gifts received by way of a will and inheritance or
- Gifts received in contemplation of death of the payer; or
- Gift/Any Amount received from Panchayat, Municipality, Municipal Committee and District Board, Cantonment Board
- Gift/Any Amount received from ny 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
- Gift received form Charitable Trust registered under section 12AA of Income Tax Act
For the purpose of this, ‘relative’ means: ‐
(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 the 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 clause (ii)to (vi).
Reference: Section 56(2)(vii) of Income Tax Act, 1961
(vii) 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.
Explanation.—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;