Received gift of car....whether taxable or not?

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Tax Payer (Querist)
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26 April 2012 I received a car, as gift, from my friend on the occasion of my Birthday. It's invoice value in my name is Rs.5,50,000/-. My auditor says that is not taxable in my hands as gift, because the CAR is not included in the definition of the term movable property. Can anyone give the correct view regarding the taxation of this transaction in my hands as per Sec.56 of IT Act?

Nilang

Nilang (Expert)
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26 April 2012 Since the car is received from your friend who is not your relative Rs.5,50,0000 would be deemed to your income from other sources in terms of Sec.56(2)(v).every moveable or immoveable property are covered by this section if received without any consideration.

Tax Payer

Tax Payer (Querist)
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27 April 2012 My auditor says that as per Explanation (d)to sub-clause (vii) of Sec. 56 (2), the term 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

[(ix) bullion

In this no where it is mentioned that CAR is included in the movable property

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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20 July 2025 Great question! Let me clarify the tax treatment of a gift of a car under Section 56(2)(v) of the Income Tax Act, 1961.

Key points:
Section 56(2)(v) deals with income from other sources where a person receives any sum of money or property without consideration or inadequate consideration exceeding Rs. 50,000.
The section applies to movable and immovable properties, and Explanation (d) provides an illustrative list of capital assets covered. However, this list is not exhaustive; it gives examples such as:
Immovable property (land/buildings)
Shares and securities
Jewellery
Archaeological collections
Drawings, paintings, sculptures, works of art
Bullion
Motor vehicles (cars) are not specifically mentioned in this list, but the definition of "property" under Section 56(2)(v) includes capital assets, which broadly cover movable property like cars as well.
Is the car taxable as a gift?
If the gift is from a "relative", then the gift is fully exempt from tax under Section 56(2).
If the gift is from a non-relative (like a friend) and the fair market value (FMV) of the car exceeds Rs. 50,000, then the FMV of the car is taxable as income from other sources.
Here, since the car is received from a friend (non-relative) and the FMV is Rs. 5,50,000 (which exceeds Rs. 50,000), the entire value is taxable in your hands under Section 56(2)(v) as "income from other sources."
Why your auditor is mistaken:
The list in Explanation (d) is not exhaustive; it's just examples.
Cars are capital assets and are considered movable property.
The absence of "car" in the list does not mean it is exempt.
Important case law supporting this:
CIT vs. Bina Modi (SC): The Supreme Court clarified that gifts received from non-relatives are taxable under Section 56(2)(v).
Ravi Kant vs. CIT (ITAT): The tribunal held that motor vehicles received as gifts from non-relatives are taxable.

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