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Gift Tax in India

Income tax is chargeable on the gifts received in cheque/cash by an individual, HUF without any consideration, exceeding Rs. 50000/- in a financial year (Section 56(2)(vi).

 

 

 


Transactions on or after 1.10.2009 without consideration or adequate consideration too will be taxed. Thus, immovable/movable property received without consideration will be included in the income of the recipient as under:

Incase of Immovable Property
1. Property is transferred without consideration and if stamp duty value exceeds Rs. 50,000

Tax Treatment in the hands of recipient
Whole value of stamp duty calculated will be taxable

In case of Movable Property
2. Property is transferred without consideration and if stamp duty value exceeds Rs. 50,000

Tax Treatment in the hands of recipient
Market value shall be base of taxation

3. For inadequate consideration and difference in fair market value and consideration exceeds Rs. 50,000.

Tax Treatment in the hands of recipient
Difference in fair market value and declared value taxable

Movable property to include shares and securities; jewellery; archaeological collections; drawings; paintings; sculptures; or any work of art.

From 1st June 2010, following amendments have taken effect:

1. Bullion is now added to the list of specified non monetary movable assets.
2. Presently, provision of transfer of shares without consideration or for inadequate consideration is applicable only to individual and HUF. However a new clause (viia) is inserted to provide that a firm or closely held company, would be liable to tax, if shares of a closely held company are received by such a firm or a closely held company without consideration or for inadequate consideration.
 

 

II. No income tax is chargeable on the following gifts, exceeding in aggregate value of Rupees 50000 in a financial year. Section 56 (vii)
(a) Received from the relatives (Section 56(2)(vii)
(b) Received on the occasion of marriage from any by wife and husband (both)/separately. Section 56(2)(vii)
(c) Received by way of will/ inheritance. Section 56(2) (vii).
(d) Received from local authority. Section 56(2)(vii)
(e) Received from any fund/foundation/university/other educational institution/hospital/other medical institution/ trust/ institution. Section 56(2) (vii)
(g) Received from any trust/institution, registered under section 12AA. Section 56(2) (vii).

 

 

 

III. Other relevant clarifications are:
(a) Deduction under Section 80-C is allowable, against the gifts treated as income.
(b) Gifts from employer are taxable under the head income from salary.
(c) Gifts received by minor, are to be clubbed in the hands of father/mother as case may be. Section 64 (1A)
(d) Exemption upto Rs. 1500 (One Thousand five hundred) is available to the father/mother as the case may be. Section 10(32).
(e) No exemption on the gifts received from the relatives of an HUF. Henceforth this exemption is restricted to the individuals.

 


(f) Gifts exceeding Rs. 50000 are chargeable to tax under the head 'Income from other Sources'. 

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