Taxation of Gift

Taxation of Gift 

Gift and Income Tax in India

As a general rule, Gift exceeding Rs. 50,000/-  is taxable under - Income from other sources.

Now, what Income Tax Act says about the Gifts:-

- If you are an Individual OR Hindu Undivided Family (HUF);

- You have received any Gift (as explained below), during the previous year;
- Without any consideration;

- and if the aggregate value of such gift is more than Rs. 50,000/- (in previous year);

- The whole sum of money is chargeable to Tax.
(applicable on and after 01.10.2009)  

What can be the type of Gifts?

1. Money(may be in the form of cash, cheque, draft etc.)

2. Immovable properties (land, building or both)

3. Prescribed movable property viz. shares/securities, jewellery, archaeological collections, drawings, paintings, sculptures or any work of art and bullion.

So, not other movable property, for example TV, AC, fridge are not coming under this provisions.

Aggregate or Individual Gifts

If one gift is not more than Rs.50,000/-  but if the aggregate value of all sums received during the one financial year exceed Rs. 50,000/- then the whole sum will be taxable. 

For example:If gift received in the form of cash of Rs. 49,000/- then it will not be taxable.

But If gift received in the form of cash is Rs. 51,000/- then the whole sum of money (Rs. 51,000/- will be taxable under Income from Other Sources).

What are the exception to this rule?

(Such exception is applicable to all type of Gifts prescribed above)

In the following cases, gifts received in excess of Rs. 50,000/- is not taxable:

-If received from any relative to an Individual and from any member of HUF to HUF,
(Who are 'relative')

  (i) spouse of the individual;

 (ii) brother or sister of the individual;

(iii) brother or sister of the spouse of the individual;

(iv) brother or sister of either of the parents of the individual;

 (v) any lineal ascendant or descendant of the individual;

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

 (vii) spouse of the person referred to in clauses (ii) to (vi); 
Gift received from Friend is Taxable. 

- On the occasion of ONLY marriage of the Individual,
 It means gifts received on the occasion of Birthday, Anniversary, other functions are Taxable.

- Under a will/ by way of inheritance,

- in contemplation of death of the payer or donor 

 [gift of property made by its owner who expects to die shortly, the gift being motivated solely by the thought of his or her demise.]

- from a local authority, any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution.(Section 10 of Income Tax Act specifies such institutions,fund etc.)

- from an Individual by a trust created or established solely for the benefit of relative of the Individual.  (applicable if the property is received on or after 01 April, 2017).

In respect of immovable properties (being land, building or both)

If an Individual or HUF receives	any person receives
on or after 01.10.2009 but before 01.04.2017	After 01.04.2017
in any previous year
from any person or persons
any immovable property(being land or building or both)
without consideration, the stamp duty value of which exceeds Rs. 50,000 then the stamp duty value shall be chargeable to tax.
for a consideration, if stamp duty value exceeds the amount of consideration and the difference between stamp duty value and consideration is more than Rs. 50,000, then such difference is chargeable to tax. (applicable from A.Y 2014-15 to A.Y 2018-19).
for a consideration, if stamp duty value exceeds 105% of the amount of consideration and the difference between stamp duty value and consideration is more than Rs. 50,000, then such difference is chargeable to tax. (applicable from A.Y 2019-20)

But, here the limit of Rs. 50,000/- is for transaction wise and NOT THE AGGREGATE VALUE. If 2 properties were received in one financial year and stamp duty value of each property is not exceeding Rs. 50,000/- then nothing will be taxable. (the aggregate value can be more than Rs. 50,000/-).

Examples of movable property received as gift

Suppose, Mr. H received in FY 2019-20 shares of Rs. 25,000/- from his close friend and Jewellery of estimated value of Rs. 55,000/- (fair market value is Rs. 57,000/-), as gifts; Now what is taxable ?

(The fair market value will be taxable)- Rs. 82,000/- will be taxable in the hand of Mr. H in FY 2019-20.

Suppose, Mr. H received in FY 2019-20 drawings after paying a sum of Rs. 49,000/- to his close friend. The fair market value of the drawing is Rs. 52,000/- Now what is taxable ?
Nothing is chargeable to tax, being the difference between fair market value and consideration paid is not more than Rs. 50,000/-

Suppose, Mr. H received in FY 2019-20 furniture after paying a sum of Rs. 49,000/- to his close friend. The fair market value of the furniture brought is Rs. 1,00,000/- Now what is taxable ?

Noting will be taxable, as furniture is not the prescribed movable asset.


What will be the case if gift/money/movable assets is received by a non-resident?

for answer- Stay tuned....



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