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The common man is confused about what tax will be levied on taking gifts or whether there will be any tax applicability on giving gifts. In this article, we will discuss about tax applicability on gifts received by individual and HUF and try to remove confusion.

Section 56(2) (x) deals with gifts received by Individual and HUF. Donor or Donee may be resident or non-resident.

Three categories of gifts described in this section.

Cash

If aggregate amount of sum of money received without consideration from one or more persons during a previous year exceeds Rs.50,000, the whole of such aggregate value is chargeable to tax. If aggregate value is less than Rs.50,000 than nothing will be taxable. For the ceiling of Rs. 50,000 all transactions of the previous year will be considered.

Immovable Property As Gift

Without Consideration

If any immovable property is received by any person, in any of the previous year, from any person or persons without consideration and the stamp duty value of which exceeds Rs. 50,000, the stamp duty value of such property will be taxable in the hands of receiver.

Taxability Of Gift Received By Individual Or HUF

For Inadequate Consideration

If any immovable property is received by any person, in any of the previous year, from any person or persons for a consideration, the stamp duty value of such property as exceeds such consideration, if the amount of such excess is more than the higher of the following amounts:

(i) Rs. 50,000; and

(ii) The amount equal to 105 per cent (for the A/Y 2019-20 and 2020-21) or 110 per cent (from A/Y 2021-22) of the consideration

The excess differential amount will be taxable in the hands of receiver.

 

Movable Property as Gift

Without Consideration

If movable property is received by any person, in any of the previous year, from any person or persons without consideration, the aggregate fair market value of which exceeds Rs. 50, 000, the whole of the aggregate fair market value of such property will be taxable in the hands of receiver.

For Inadequate Consideration

If movable property is received by any person, in any of the previous year, from any person or persons for a consideration which is less than the aggregate fair market value of the property by an amount exceeding Rs. 50, 000, the aggregate fair market value of such property as exceeds such consideration.

The excess differential amount will be taxable in the hands of receiver.

 

Exemptions on Taking Gifts

In the Income Tax Act, exemption has been given in some situations and from some people on taking gifts. Exemptions are given below:

Any sum of money or any property received:

  • from a relative; or
  • on the occasion of the marriage of the individual; or
  • by way of will or inheritance; or
  • in contemplation of death of the payer; or
  • from any local authority; or
  • from any fund, foundation, university, other educational institution, hospital, medical institution, any trust or institution referred to in clause (23C) of section 10; or
  • from a charitable institute registered under section 12A or section 12AA or section 12AB; or
  • by any fund, any trust, any university, any other educational institutions, any hospital or any other medical institution referred to in section 10 (23C); or
  • by way of transaction not regarded as transfer under clause (i) or clause (iv) or clause (v) or clause (vi) or clause (via) or clause (viaa) or clause (vib) or clause (vic) or clause (vica) of section 47; or
  • from an individual by a trust created or established solely for the benefit of relative of the individual.

For the above mentioned points the term Relative means:

  1. Spouse of Individual
  2. Brother or Sister of Individual
  3. Brother or Sister of Spouse of Individual
  4. Brother or Sister of either of the parents of Individual
  5. Any Lineal ascendants or descendants of the individual
  6. Any Lineal ascendants or descendants of the spouse of the individual
  7. Spouse of the person referred to in (2) to (6)

Few Points to Remember:

  1. Gift received from relative is exempt.
  2. Gift received on other occasions (e.g. gifts on birthday, etc.) from non-specified person shall be taxable under the head income from other sources.
  3. Gift on the occasion of marriage of the recipient is not chargeable to tax. Marriage gifts may be received from relatives, friends or any other person.
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