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Gift of property frm relative

priyanshi (business) (64 Points)

13 February 2016

I want to know whether property recieved frm the father's brother as gift is exempted under IT Act and what are the other provisions applicable on such gift.

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CA RAJESH BALSARA (Proprietor) (262 Points)
Replied 13 February 2016

Taxability of Gift under Income Tax Act, 1961

As per Income Tax Act, receiver (donee) of gift is charged to taxation u/s 56(2)(vii). The donor of gift is not charged to taxation under this section. However, the below cases is analyzed from the taxation as applicable to donor ( Capital Gain taxability) and donee ( Gift taxability under I.Tax Act).

56(2)(vii): Gifts received by Individual & HUF

56(2)(vii) is applicable only when gifts are received by Individual and HUF.

Donor or Donee may be Resident or non Resident.

Cash: If aggregate value is less than Rs.50000 than nothing will be taxable. If value exceeds Rs. 50,000, the whole amount will be taxable.

Movable* Property**:

Without Consideration:

(i) If aggregate Fair Market value is less than Rs.50000/- than nothing will be taxable.

For Donor: No Capital Gain because u/s 47(iii), it is not considered transfer.

For Donee:

– 56(2)(vii) is not applicable.

– Cost of Acquisition (COA) will be previous owner’s Cost as per Sec 49(1).

– Holding period of previous owner period will be counted for donee.

(ii) If aggregate Fair Market value is more than Rs.50000 :

For Donor: No Capital Gain because u/s 47(iii), it is not consider transfer.

For Donee:

– COA will be Fair Market Value (FMV)

– FMV shall be income from other Sources u/s 56(2) (vii).

– Holding period will be counted from the date of acquisition of property by donee.

Inadequate Consideration:

if the difference of consideration and FMV is greater than Rs.50000/- than differential amount will be taxable for receiver and the treatment shall be the same as mentioned in (ii) above.

*Movable property means Shares and Securities, jewellery, Archaeological collection, Drawings, Paintings, Sculptures any work of art, bullion. If any movable property other than above is gifted than there is no taxability.

**Property means Capital Assets in the hands of Receiver means if property is Stock in Trade, Raw Material & Consumable Stores for receiver than it will not taxable.

Immovable Property (Land, Building or Both):

Without Consideration:

(iii) if Stamp Duty value(SDV) is less than Rs.50000/- than nothing will be taxable.

For Donor: No Capital Gain because u/s 47(iii) it is not consider transfer.

For Donee:

– 56(2)(vii) is not applicable.

– COA will be previous owner Cost as per sec 49(1).

– Holding period of previous owner period will be counted for donee.

(iv) if Stamp Duty value is more than Rs.50000/- :

For Donor: No Capital Gain because u/s 47(iii) it is not consider transfer.

For Donee:

– SDV is income from other Sources u/s 56(2)(vii).

– COA will be SDV.

– Holding period will be counted from acquisition of property by donee.

Inadequate Consideration:

if the difference of consideration and SDV is greater than Rs.50000/- than difference amount will be taxable for receiver (Applicable from A.Y.14-15).

For Donor: Sec 50C will be applicable if Land & Building is capital Assets for Donor and Sale Consideration for Donor will be SDV. Capital Gain will be SDV – COA. Sec 43CA (From A.Y 2014-15) will be applicable if Land & Building is not a capital Assets for Donor and Sale Consideration for Donor will be SDV. Income from PGBP will be SDV – COA.

For Donee: Difference of SDV and Consideration is income from other Sources u/s 56(2)(vii).

At the time of further sale COA will be SDV and holding period will be counted from acquisition of property.

Exception: In below circumstances, gifts are not taxable even if value is greater than Rs.50000/-.

Gifts received:

i. From Relatives1

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).

1 Relatives means

– 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.

Below is a comprehensive list of Donors as per definition of relative under I.Tax Act ( Hindi connotation has also been mentioned)

List of Male Donors	List of Female Donors
Father (Papa or Pitaji)	Mother (Maa or Mummy)
Brother (Bhai)	Sister (Bahin)
Son (Beta or Putra)	Daughter (Beti or Putri)
Grand Son (Pota or Potra)	Grand Daughter (Poti or Potri)
Husband (Pati)	Wife (Patni)
Sister’s Husband (Jija)	Brother’s Wife (Bhabhi)
Wife’s Brother (Sala)	Wife’s Sister (Sali)
Husband’s Brother (Dewar)	Husband’s Sister (Nanad)
Mother’s Brother (Mama)	Mother’s Sister (Mausi)
Mother’s Sister Husband (Mausa)	Wife’s brother’s wife (Sala Heli)
Father’s Brother (Chacha or Tau)	Father’s Brother’s Wife (Chachi or Tai)
Father’s Sister’s Husband(Fufa)	Father’s Sister (Bua)
Grand Father (Dada, Pardada)	Grand Mother (Dadi, Pardadi)
Daughter’s Husband (Jawai)	Son’s Wife (Bahu or Putra Vadhu)
Spouse Father (Sasur)	Spouse Mother (Sas)
Spouse Grand Father (Dada Sasur)	Spouse Grand Mother (DadiSas)
Brother’s Wife (Bhabhi)	Mother’s Brother’s Wife (Mami) Husband’s Brother’s Wife (Devrani or Jithani)