Gift tax

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CA Koustubh Vishnu Bhatye (Querist)
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20 September 2011 Whether gift tax is in still in force?
If yes, which transactions are covered under it? and what is the tax rate?
Wheter gift of immovable property from son to mother or mother to son is covered under this act?

CMA Ashutosh Kumar Gupta

CMA Ashutosh Kumar Gupta (Expert)
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23 September 2011 Up to September, 1998 any amount received without consideration was taxable as gift under Gift Tax Act. From October, 1998 to August, 2004 any amount received as gift or without consideration no tax was leviable either for giver or receiver.
Thereafter, in Section 56(2), a Clause (v) was inserted vide Finance (No.2) Act, 2004 to provide that a sum of money exceeding Rs.25,000 received by an individual or HUF from any person after 01.09.2004 without consideration will be deemed to be income. In this provision amount was chargeable only if a single receipt was more than Rs.25,000. Hence, gifts became legalized as before this it was always debatable and issue before A.O. was that whether particular amount is gift or unexplained credit by the assessee in the form of gift. Such sums of money received as gifts, other than those in circumstances covered in exceptions in section 56(2), are to be treated as income from other sources. Such sum will not be treated as income from other sources if such receipt falls in those exceptions.
Amount received from any relative, as defined in explanation to section 56(2)(v)/(vi) is also not chargeable to tax.
Above provision was further amended by introduction of a new clause (vi) in Section 56(2) w.e.f. 1.4.2006 to provide that if aggregate amount received during the year is more than Rs. 50,000 the same will be chargeable to tax. Other conditions remained the same as were provided in Clause (v).
In short, the provisions relating to tax on such receipts have travelled as under:
Period
Taxability
Up to 30/09/1998
Liable for tax as gift under the Gift Tax Act in the hands of the donor if amount of gift exceeded Rs.30,000 in a year
01/10/1998 to 31/08/2004
No tax on such sum
01/09/2004 to 31/03/2006
Taxable u/s 56(2)(v) as income but only sum of money if the same exceeds Rs.25000 from each person
01/04/2006 to 30/09/2009
Taxable u/s 56(2)(vi) as income but only sum of money if same exceeded in aggregate Rs.50000 in a year in the hands of the recipient from all donors
01/10/2009 onward
Taxable Receipt of sum of Money, Immovable property as well as certain specified movable property if the amount exceeds Rs.50000 in aggregate in case of each of such category of assets
01/6/2010 onwards
sec. 56(2)(viia) inserted to tax Partnership Firms and unlisted companies (i.e. companies in which public are not substantially interested) when shares of specified companies are received without consideration or at inadequate consideration

CA Koustubh Vishnu Bhatye

CA Koustubh Vishnu Bhatye (Querist)
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27 September 2011 Thanks for the detailed reply.

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