Implications of gift tax
Demystifying the legal provisions with examples of instances where it is applicable
Any sum of money or moveable property or immovable property, which is received without consideration or for inadequate consideration, is considered to be taxable in the hands of the recipient subject to certain exceptions. The gift is not specifically defined under Income Tax Act, 1961.
Any amount or property received from close relatives during the financial year is completely exempt from tax.
As per the explanation to Section 56(2)(vii) the expression “relative” means:
(i) in case of an individual
(A) spouse of the individual;
(B) brother or sister of the individual;
(C) brother or sister of the spouse of the individual;
(D) brother or sister of either of the parents of the individual;
(E) any lineal ascendant or descendant of the individual;
(F) any lineal ascendant or descendant of the spouse of the individual;
(G) spouse of the person referred to in items (B) to (F); and
(ii) in case of a Hindu undivided family, any member thereof; gift is taxable in the hands of the individual recipient under the following circumstances:
When any gift received (cash or kind) exceeds Rs 50000 (other than received from prescribed relatives) then the entire gift amount will be taxable or any immovable property is received
l Without consideration – Entire value as per stamp duty recknor rate is taxable provided the same exceeds Rs. 50,000.
l Inadequate consideration, the stamp duty value of such property exceeding the consideration received if such difference exceeds Rs. 50,000, then the entire differential amount would be taxable under the head Income from other sources.
Movable property is received
l Without consideration - fair market value (“FMV”) is taxable provided the same exceeds Rs. 50,000.
l Inadequate consideration means the actual consideration is less than the Fair market value (‘FMV’) but FMV exceeds Rs.50,000, than the difference between the FMV and the actual consideration shall be chargeable to tax under the head Income from other sources.
Demystifying the legal provisions with examples of instances where it is applicable
Any sum of money or moveable property or immovable property, which is received without consideration or for inadequate consideration, is considered to be taxable in the hands of the recipient subject to certain exceptions. The gift is not specifically defined under Income Tax Act, 1961.
Any amount or property received from close relatives during the financial year is completely exempt from tax.
As per the explanation to Section 56(2)(vii) the expression “relative” means:
(i) in case of an individual
(A) spouse of the individual;
(B) brother or sister of the individual;
(C) brother or sister of the spouse of the individual;
(D) brother or sister of either of the parents of the individual;
(E) any lineal ascendant or descendant of the individual;
(F) any lineal ascendant or descendant of the spouse of the individual;
(G) spouse of the person referred to in items (B) to (F); and
(ii) in case of a Hindu undivided family, any member thereof; gift is taxable in the hands of the individual recipient under the following circumstances:
When any gift received (cash or kind) exceeds Rs 50000 (other than received from prescribed relatives) then the entire gift amount will be taxable or any immovable property is received
l Without consideration – Entire value as per stamp duty recknor rate is taxable provided the same exceeds Rs. 50,000.
l Inadequate consideration, the stamp duty value of such property exceeding the consideration received if such difference exceeds Rs. 50,000, then the entire differential amount would be taxable under the head Income from other sources.
Movable property is received
l Without consideration - fair market value (“FMV”) is taxable provided the same exceeds Rs. 50,000.
l Inadequate consideration means the actual consideration is less than the Fair market value (‘FMV’) but FMV exceeds Rs.50,000, than the difference between the FMV and the actual consideration shall be chargeable to tax under the head Income from other sources.
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