Taxability of Gifts Received by an Individual or HUF for AY 16-17 & 17-18

Taxability of Gifts Received by an Individual or HUF for AY 16-17 & 17-18

What is gift?

Gift can be defined as receiving any object or thing be in cash or in kind as a token of love, respect, or care from any person being our friends, relative or parents or any other person on some occasion or otherwise.

Since gift is a mean of transferring anything to others without consideration, sometimes people use it as a mean of tax evasion, this was the big reason of bringing gift in the decorum of taxation.

And hence, if a person receives a gift, and if the value of such gift exceeds the certain limit then he/she must add it in his income and such income is taxable under the head “Income from other source” and pay the income tax at normal income tax rates. However, there are certain exceptions on declaring the gifts as income.

The taxability of gift received by an individual or HUF is provided by Section 56(2)(vii) of Income Tax Act.

 

The detail of above mentioned section is as under:

Cash Gifts: If cash receipts exceed ₹50,000 in aggregate, then the whole amount is taxable.

Immovable property gift: If received without consideration or for inadequate consideration stamp duty value of which exceeds ₹50,000 then the stamp duty value of such property shall be taxable

Specified Movable property gift: if received without consideration or for inadequate consideration, then the whole of the aggregate fair market value of such property shall be taxable.

 

EXCEPTIONS:

This clause shall not apply to any sum of money or any property received –

  1. From any relative; or
  2. On the occasion of marriage of the individual; or
  3. Under a will or by way of inheritance; or
  4. In contemplation of death of the payer or donor; or
  5. From any local authority; or
  6. From any trust or institution registered under sec 12AA
  7. Gift from any fund or foundation or university or other educational institution or hospital or any trust or any institution referred to in Section 10(23C)

Detail of some important exemptions

Gifts received From Relatives

As per the Income tax act, the Gifts received from any of your relatives are fully exempt from tax. Whether you are received the gifts as Cash, Cheque or any goods. You are not liable to pay the tax for these gifts.Here the “relatives” term defines by the Income Tax act as follows:

  • Spouse of the individual
  • Brother or sister of the individual
  • Brother or sister of the spouse of the individual
  • Brother or sister of either of the parents of the individual
  • Any lineal ascendant or descendant of the individual
  • Any lineal ascendant or descendant of the spouse of the individual, Spouse of the person referred to in clauses (ii) to (VI).

For example, if you are receiving gift of ₹100000 from your uncle (your mother’s brother), it is fully exempt from the Tax. Whenever you get the gifts please apply the relations in the above list to ascertain whether you are liable to pay any tax for the received gift.

Gift received on the occasion of marriage

Gift (i.e. immovable property received without consideration) received only on the occasion of marriage of the individual is not charged to tax. Apart from marriage there is no other occasion when gift received by an individual is not chargeable to tax.

Meaning of property

“property” means the following Capital asset of the assesse, namely –

i. Immovable property being land or building or both;

ii. Shares and securities;

iii. Jewellery;

iv. Archaeological collection;

v. Drawings;

vi. Paintings;

vii. Sculptures;

viii. Any work of art; or

ix. Bullion;

Notes;

A. Sum of money includes not only cash but also cheque, drafts, fixed deposit receipts or a NSC since it represents a sum of money though not in cash

B. The sum of money is taxable if aggregate value of gifts received by assesse from any person or persons exceeds ₹50000. E.g.: If A receives ₹31000 from B and ₹20000 from C, then, since aggregate value of gifts received by A exceeds ₹50000, thus whole of ₹51,000 is taxable

C. The definition of property is exhaustive and no other asset can be included in the same.

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