LIVE GST Certification Course by CA Arun Chhajer begins 27th April. Register Now!!

Gift of Car

Samir (ACA) (113 Points)

22 March 2010

An Showroom gifts a Car to a person.

Is it taxable in the hands of the person?

Can he claim Depreciation if he puts the car to his business use?

Will it make any difference if he wins the car in an Competition, such as quiz or say Highest spender in a Mall gets a Car?

Is Car received without consideration Taxable?

Reply
Follow
Share

18 Replies

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 22 March 2010

Hi samir...

1. If a person gets a gift (wether car or anything else), from a person other than his relative, its always taxable

2. Yes, depreciation can be claimed on the car if its put for the business purpose.

3. Car won in a competition is like a lottery won. He'll be taxed upto 30% of the car's price... E.g if a person wins car pricing 400000, then he has to pay tax on it of Rs. 120000 to the government.

4. Depends on various situation, as two u asked urself, i.e as gift or as competition prize, there can be other ways too... Taxability changes according to situation

3 Like

manikandan.J (Accounts Manager) (363 Points)
Replied 22 March 2010

hi uday kiran

you claim depreciation on car rate of 15% depreciation as per IT ACt 1961

you can use the Company it is afftected different rates as per companies Act

manikandan

Samir (ACA) (113 Points)
Replied 22 March 2010

I understand as under:

Section 56 - Income from Other Sources:

...................................................

(vii) where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009,

(a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum;

(b) any immovable property,

(i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;

(ii) for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consi-deration;

(c) any property, other than immovable property,

(i) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property;

(ii) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration :

Provided that where the stamp duty value of immovable property as referred to in sub-clause (b) is disputed by the assessee on grounds mentioned in sub-section (2) of section 50C, the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of section 50C and sub-section (15) of section 155 shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of sub-clause (b) as they apply for valuation of capital asset under those sections :

Provided further that this clause shall not apply to any sum of money or any property received

(a) from any relative; or

(b) on the occasion of the marriage of the individual; or

(d) in contemplation of death of the payer or donor, as the case may be; or

(e) from any local authority as defined in the Explanation to clause (20) of section 10; or

(f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or

(g) from any trust or institution registered under section 12AA.

Explanation.For the purposes of this clause,

(a) assessable shall have the meaning assigned to it in the Explanation 2 to sub-section (2) of section 50C;

(b) fair market value of a property, other than an immovable property, means the value determined in accordance with the method as may be prescribed;

(d) property means

(i) immovable property being land or building or both;

(ii) shares and securities;

(iii) jewellery;

(iv) archaeological collections;

(v) drawings;

(vi) paintings;

(vii) sculptures; or

(viii) any work of art;

(e) relative shall have the meaning assigned to it in the Explanation to clause (vi) of sub-section (2) of this section;

There is no specific provision inthe underlying Section to include CAR in Income from other sources

Is the said List of property specified in the said Section exhaustive or inclusive i.e. can we exclude Car from this section as there is no specific mention of the same in the Section or somewhere in the Act.

CAR is not money or

(i) immovable property being land or building or both;

(ii) shares and securities;

(iii) jewellery;

(iv) archaeological collections;

(v) drawings;

(vi) paintings;

(vii) sculptures; or

(viii) any work of art;

Should it still be taxed under section 56?

Ayushraj (Professional) (125 Points)
Replied 23 March 2010

I don't think Car (Gift) is covered under Section 56. Earlier to 1-10-2009 even Immovable Property such as Flat, etc, gifted by non-relatives did not come under the Tax Net, that's why First time this amendment was made to bring specific items under Tax Net after abolishment of Gift Tax Act.

1 Like

Samir (ACA) (113 Points)
Replied 25 March 2010

Can any other member give his valuable comments as to whether Gift of Car is taxable or not?

Aditya Maheshwari (CA in Practice) (35867 Points)
Replied 25 March 2010

The property definititon as per Section 56 reads as under:

(d) property means

(i) immovable property being land or building or both;

(ii) shares and securities;

(iii) jewellery;

(iv) archaeological collections;

(v) drawings;

(vi) paintings;

(vii) sculptures; or

(viii) any work of art;

Since the same is not specifically mentioned then the same is NOT liable for taxation u/s 56.

However Car won in a competition would be like a lottery won and will be taxed @ 30% of the car's price.

Samir (ACA) (113 Points)
Replied 25 March 2010

Dear Aditya,

you have mentioned that " Since the same is not specifically mentioned then the same is liable for taxation u/s 56."

do you mean to say that "Since the same is not specifically mentioned then the same is NOT liable for taxation u/s 56."

Aditya Maheshwari (CA in Practice) (35867 Points)
Replied 25 March 2010

Yes Samir and my post has been modified accordingly. Thanks for informing me about my mistake

Samir (ACA) (113 Points)
Replied 26 March 2010

Thanks Aditya & others.

I think now i can safely assume that If an Showroom gifts a Car to a person. It is Not taxable in the hands of the person or otherwise will not deemed to be his Income (u/s 56 or other provisions of the Act)

So it will be treated as Gift & not Income and will be Tax free. (Only i think that the assessee will have to take a Note/ Confirmation Letter/ Gift Deed from the Showroom stating that the car has been gifted to the assessee)

k.manikanta swamy (Student CA IPC / IPCC) (32 Points)
Replied 11 May 2015

if it is less than 50000 it is not taxable in the hands of recepient.

if it is more than 50000 it is taxable.

yes he can claim depreciation if he uses it for business use the fair market value is the actual cost of the asset.

if he received car for without consideration it is taxable in the hands of giver. no implication of tax liability in the receiver. but if he receives it for consideration implicartions arise. as per section 56 of the income tax act.

(Guest)

We are debating over an issue raised 5 years ago.

Today the position is that The following will be taxed as income from other sources in the hands of the receiver (unless it is gifted by a relative)

U/s 56 (2)(vii)(c) any property, other than immovable property,—

(i) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property;

deepansh chawla (CA FINALIST) (180 Points)
Replied 13 May 2015

Car is not includible in immovable property . It wont be taxable . However if it is won in lottery , it will be taxes at 30% i.e the winner needs to submit the sum to the govt before getting it

(Guest)

Originally posted by : deepansh chawla
	Car is not includible in immovable property . It wont be taxable . However if it is won in lottery , it will be taxes at 30% i.e the winner needs to submit the sum to the govt before getting it

U/s 56 (2)(vii)(c) is about any property, other than immovable property. So, gift of car by a non relative will be taxable.

1 Like

Vishal Goel (Chartered Accountant) (1688 Points)
Replied 07 December 2016

Originally posted by : Madhavi Pandit
	Originally posted by : deepansh chawla Car is not includible in immovable property . It wont be taxable . However if it is won in lottery , it will be taxes at 30% i.e the winner needs to submit the sum to the govt before getting it U/s 56 (2)(vii)(c) is about any property, other than immovable property. So, gift of car by a non relative will be taxable.