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MEANING OF GIFT

56(2)(vii) is applicable only when gifts are received by Individual and HUF. Donor or Donee may be Resident or non Resident. As per the Income Tax Act, 1961, if the value of gifts received, is more than Rs. 50,000 a year, then such amount is taxed as income in the hands of the receiver. These gifts may be in any form – cash, jewellery, movable and immovable property, shares etc

However, this rule is not applicable if :
Gifts received:

i. From Relatives
ii. On the marriage of individual,
iii. By will or inheritance
iv. In contemplation of Death of payer
v. From local authority
vi. From Charitable Trust registered u/s 12AA
vii. From Any Trust, Foundation etc referred u/s 10(23c).

Meaning of Relatives

- Spouse of Individual
- Brother & Sister of Individual
- Brother & Sister of Spouse of Individual
- Brother & Sister of either of the parents of Individual
- Any Lineal ascendants or descendants of the individual
- Any Lineal ascendants or descendants of the Spouse of the Individual

Above section clear that if Assessee received Gift from any relatives in any amount in cash it will not be taxable in the hands of Donee.

RESTRICTION ON CASH TRANSACTION

As per Section 269ST, any person who enters into a transaction of Rs 2 Lakh or above in cash, will be liable to a penalty of an amount equivalent to the amount of transaction.

For example: If you buy an expensive watch for cash worth Rs 7 Lakh, it is the shopkeeper who will have to pay the tax (penalty) of Rs 7 Lakh. So, here the tax rate is 100%.

Though this new section on Cash Transaction limit sounds simple, we need to go through it in details, as I believe that this may have quite an impact on our daily financial lives.

With effective from 1st April 2017, no person shall receive an amount of Rs 2 Lakh or more;

(A) in aggregate from a person in a day (or)
(B) in respect of a single transaction (or)
(C) in respect of transactions relating to one event or occasion from a person.

The new Cash transaction limit is not applicable if a person receives the amount through an Account Payee Cheque (or) an Account Payee Bank Draft (or) through use of electronic clearing system through a bank account. (Looks like, any receipts done through e-Wallets like Paytm, credit cards etc., may also be hit by this new amendment, need more clarity though.)

OTHER IMPORTANT POINT

• Based on my interpretation of Section 269ST, payment modes like bearer cheque and self-cheque will also be considered on par with Cash-based transactions only.

• It has been clearly stated that penalty (if any) is chargeable to an individual who violates section 269ST, even if you do not have PAN and/or is not a tax assessee.

• The restriction of receipt of money in Cash of Rs 2 Lakh or above in cash is applicable irrespective of whether it is for personal / business purpose, capital or revenue in nature, tax-free or taxable income.

• Kindly note that the payer of money is not liable to pay any penalty, it is the receiver of cash who has to bear the penalty u/s 271DA.

• Donations in cash exceeding Rs 2,000 are not permitted (Donations can be claimed u/s 80G)

• Premiums on Health insurance policies paid in cash cannot be claimed u/s 80D

• Loans or Deposits cannot be repaid in cash in excess of Rs 20,000 or more

• Payment of above Rs 10,000 per person, can not be made for any business payment towards any expenses (or) purchase of the capital asset.

• One should not accept a loan or deposit or sale consideration of immovable assets in cash in excess of Rs. 20,000.

As Reading of Section 269ST no detail given regarding Gift, As understanding of section Gift may be given any amount of Cash.

CONCLUSION

As per section 269ST, it doesn’t cover transaction of the gift. As author view that Donor can give gift to the relative in cash any amount as availability in books but it is suggested that Government prefers Bank Transaction and it is helpful to justify the transaction, Gift given more than Rs. 2.00 Lacs thorough banking Channel.

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Category Income Tax, Other Articles by - CA PIYUSH KAPOOR 



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