Everyone loves gifts, especially when received, but most of them are unaware of income tax implication on the gifts. There are number of occasions in which gifts are exchanged.
In this blog, we will discuss provisions relevant with taxation of gifts in the hands of individual.
First of all, receiver must ensure that gift is from genuine source and is not involving any black money and proceeds of crime. It may be advisable particularly in case of the high value gift that the gift must be registered through a gift deed by paying required stamp duties as prescribed by concerned State Government. It will enable recipient to prove the genuineness of the transaction as a gift and not sale -purchase transaction when scrutiny arises from the tax department.
Income Tax Act defines taxable gifts as under “gift means property which is a capital asset of the assessee (i.e., recipient), namely, Money, Immovable property being land or building or both, and Movable property being shares and securities, jewelry, archaeological collections, drawings, paintings, sculptures, any work of art or bullion” received without consideration or for an inadequate consideration.
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Tax Free Gift
- Gift Received from the specified relative. This is further explained in next paragraph.
- Gift received from non-relative & relative on the occasion of marriage of the receiver are exempt from tax. It is important to note that the gift received from non-relative on other occasions like birthday, anniversaries and housewarming will attract tax if the aggregate value of gift exceeds ₹50,000.
- Gifts received by way of will or inheritance are exempted from tax.
- Gifts received in contemplation of death of the donor (i.e., gifts given by a person in anticipation of his/ her death in the near future).
- Gift received from a local authority, charitable trust, foundation or university or other educational institution or hospital or other medical institution.
- Property received by way transaction not regarded as transfer under section 47(i)/(iv)/(v)/(vi)/(vib)/(vid)/(vii).
Gift from relatives
Gift received from specified relative is exempt from income-tax in the hands of receiver. Thus, recipients of gift are fully exempt from income tax without any monetary limit.
Specified relative for the purpose of exempt gift means (i) spouse of the receiver; (ii) brother or sister of the receiver; (iii) brother or sister of the spouse of the receiver; (iv) brother or sister of either of the parents of the receiver; (v) any lineal ascendant or descendant of the receiver; (vi) any lineal ascendant or descendant of the spouse of the receiver; (vii) spouse of any of the persons referred to above.
Lineal ascendent of the receiver include:
- Father,
- Grandfather,
- Great-grandfather,
- Mother,
- Grandmother, and
- Great-grandmother
Lineal descendent of the receiver include, as well as from the spouse’s of the receiver:
- Children,
- Grandchildren, and
- Great-grandchildren.
Lineal ascendant from the spouse’s side of the receiver:
- Father,
- Grandfather,
- Great-grandfather,
- Mother,
- Grandmother, and
- Great-grandmother
Taxable gifts
Other than above maintained exempt category, the following kind of gifts are taxable in the hands of the recipients:
∅ Money: – This gift could be given in cash/cheque/electronic mode. If the aggregate value of money gift received during the year by an individual exceeds ₹50,000, the whole of the aggregate value of such sum is taxable as “income from other sources” in the hands of recipient. The important point to be noted in this regard is the taxability of the gift is determined on the basis of the aggregate value of gift received during the year and not on the basis of individual gift.
Example: – Mr. Ganesh received gift of ₹1,15,000 from his Delhi’s friend and ₹25,000 from his Ranchi’s friend during the financial year 2022-23.
Ans: – In this case gift is received neither from relative nor on the occasion of his marriage and also the aggregate value of gift received by Ganesh’s exceeds ₹50,000. Therefore, entire ₹1,35,000 is taxable in the hands of Mr. Ganesh. It will be charged to tax under the head “Income from other sources“.
∅ Movable Property:
If movable property is received without consideration:
The “aggregate fair market value” of movable property gift on the date of receipt would be taxed as the income of recipient in the year of receipt, if it exceeds ₹50,000.
If movable property is received for inadequate consideration:
If the difference between the “aggregate fair market value” and inadequate consideration exceeds ₹50,000, such difference would be taxed as the income of the recipient in the year of receipt.
Movable property is a capital asset of the recipient namely, – shares and securities, jewelry, archaeological collections, drawings, paintings, sculptures, any work of art or bullion. It is important to note that the movable property gift would be taxable only if such property is in the nature of a capital asset of the recipient and not stock-in-trade, raw material or consumable stores of any business of the recipient.
In this case also the taxability of the movable property gift is determined on the basis of the aggregate value of gift received during the year and not on the basis of individual gift.
Example: – Mr. Rohit purchased a motor car for ₹1,52,000, the fair market value of car is ₹2,52,000 during the year 2022-23. What will be tax treatment of motor car purchase?
Ans: – Motor car does not come under the definition of prescribed movable property, hence, nothing will be taxed in respect of purchase of motor car.
Example: – Mr. Sarthak purchased bullion for ₹5,50,000, the fair market value of the bullion is ₹ 6,70,000 and Gold jewellery purchased for ₹1,58,000, the fair market value of gold jewelry is ₹2,48,000 during the year 2022-23. What will be tax treatment of bullion and jewellery purchase?
Ans: – Gold jewellery and bullion, as per above definition, are considered as movable property for the purpose of section 56(2)(x)(b). Both of these properties were acquired for less than their fair market value. Further, these two properties were not acquired from a specified relative. The excess of the fair market value over the purchase proce amount to ₹2,10,000 (₹9,80,000-₹7,08,000), which exceeds ₹50,000. Therefore, the entire excess of the fair market value over the purchase price, i.e., ₹2,10,000, will be subject to taxation in the hands of Mr. Sarthak. This amount will be taxed under the head ‘Income from other sources.
∅ Immovable Property:– Land and/or building may be acquired by an individual without consideration or for an inadequate consideration.
(1) When property is received without consideration (i.e., without payment), and the stamp duty value (i.e., the values adopted by the authorities for payment of stamp duty) of such property exceeds ₹50,000, the entire stamp duty value of the property would be taxable in the hands of the beneficiary. In this case, the limit of ₹50,000 applies per property acquired/received.
(2) If property is acquired for an inadequate consideration and difference between the stamp duty value and cost of acquisition is more than the higher of ₹50,000 and 10% of the consideration, then the stamp duty value in excess of the cost of acquisition would be taxable as income in the hands of beneficiary. When such immovable property is subsequently sold, the cost of acquisition for the computation of capital gains will be based on the value considered under section 56(2)(x)(b).
A question may arise regarding which stamp duty value will be considered for the determination of the taxable imcome under section 56(2)(x)(b) when the date of the agreement fixing the consideration differs from the date of registration of the property acquired for an inadequate consideration. This question gives rise to two possible scenarios.
In the first scenario, where token money has been paid by the acquirer on or before the date of entering into the agreement by way of account payee cheque or account payee bank draft or the use of electronic clearing systems such as IMPS, UPI, RTGS, NEFT, Net banking, debit card, credit card, or BHIM Aadhar Pay. In this case, the stamp duty value as of the date of entering into the agreement will be considered for determining taxable income under section 56(2)(x)(b).
In the second scenario, token money has been paid by the acquirer on or before the date of agreement not by way of the mode prescribed in the first scenario. In this case, the stamp duty value as of the date of property registration will be considered for determining taxable income under section 56(2)(x)(b).
The taxability of the immovable property gift is determined on an individual acquisition basis.
For example, if the stamp duty value of the asset is ₹12,00,000 and the consideration is ₹9,50,000. Then the difference of ₹ 2,50,000 (which is more than ₹95,000 being higher of ₹50,000 and 10% of the consideration, i.e., ₹95,000) will be taxable as income from other sources in the hands of the recipient.
Example: – Mr. Ajit received a gift of flat from his Father-In-Law. The stamp duty value of the flat is ₹15,84,000. In this case whether the total value of gifted property will be charged to tax?
Ans: – In instance case immovable property gift (i.e., flat) is received without consideration from Father-in-Law. Father-in-Law is covered within the meaning of Relative. Therefore, entire value of gift received from relative will be exempt from tax in the hands of Mr. Ajit. It is immaterial that the stamp duty value exceeds ₹50,000.
Taxation of gifts received by NRIs
Non-resident Indian (NRIs) will have to pay taxes on gifts received in India, or accruing or arising in India, or deemed to accrue or arise in India. Gift in the hands of NRIs will be charged to tax under the head income form other sources. A resident gift-giver has to deduct tax at a rate of 30% when giving a gift to an NRI, but only when the value of the gift exceeds ₹50,000. However, when a gift is given by a resident to another resident, there is not requirement to deduct tax at source (TDS).
Example: – Nainish send ₹58,000 to his NRI brother on his birthday and another ₹65,000 to his NRI friend as a Diwali gift. Whether NRI will have to pay tax in India? Whether Nainish will be liable to deduct tax?
Ans: – Nainish’s brother fall in the category of specified relative. Therefore, his NRI brother will be exempted. Further, in this case Nainish will not be obliged to deduct tax.
Nainish’s NRI friend will have to pay tax in India as the value of gift exceed ₹50,000. Further, this is not a receipt for which exemption is granted. In this case Nainish will have an obligation to deduct tax at the rate of 30%.
Disclosure of Gift in Income Tax Return (ITR)
A taxpayer is liable to fully disclose gifts received, whether taxable or exempt, during the financial year while filing his/her ITR and taxes should be paid on taxable gift to avoid any litigation, disputes or penalties. This will work as a historical record and help you produce evidence in case of any future enquiry.
Exempt gift/income will be reported in ITR as follow
| ITR form | Schedule | Particular to reported |
| ITR 1 | In Income Detail of Si. No. 7 | (i) Nature of income
(ii) Description (iii) Amount |
| ITR 2 | EI | |
| ITR 3 | EI |
For feedback or clarifications, you can reach the author at [email protected].
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Disclaimer: The information provided in this article is for general informational purposes only. It is not intended as professional advice and should not be construed as such. No action should be taken based solely on the information contained in this article. Always consult with a qualified professional for advice tailored to your specific situation.
(Republished with Amendments)
Author Bio
Is gift of immovable property to trust is taxable?
Gift in question will not be taxable-
if it is from relative.
I want to gift a plot to my cousin. what is the tax liability for doner and donee. please reply.
Tax Treatment in the Hands of the Donor:
A gift of a plot will indeed be categorized as a “transfer” in the context of the donor’s situation, potentially making them liable for capital gains tax. However, it’s important to note that this specific type of transfer is granted an exemption from capital gains tax under section 47(iii) of the Income Tax Act. As a result of this exemption, the donor will not be required to fulfill any capital gains tax obligations.
Tax Treatment in the Hands of the Donee:
Gifts received from relatives are not subject to taxation. The term “relative” has been exhaustively defined. Notably, cousins are not specified in the list of relatives. Consequently, cousins are not regarded as relatives under this definition. When you are not considered as a relative of the gift’s recipient and the value of the gift exceeds Rs. 50,000, the recipient will be required to pay taxes on the value of gift.
For this purposes, “relative” means—
(i) spouse of the individual;
(ii) brother or sister of the individual (not cousin brother or sister );
(iii) brother or sister of the spouse of the individual;
(iv) brother or sister of either of the parents of the individual;
(v) any lineal ascendant or descendant of the individual;
(vi) any lineal ascendant or descendant of the spouse of the individual;
(vii) spouse of the person referred to in clauses (ii) to (vi);
Note: In this context, the term “individual” refers to the recipient of the gift.
is a money gift received by resident parent from NRI Son exempted ? pls explain.
Any gift received from a “relative” is exempt. Relative is defined to include the son of an individual. Therefore, any sum received from the son of an individual is not liable to income tax.
Hello Sir,
I am an OCI(Overseas Citizen of India) holder. I am living in India for the past 3 years. I received a Gift through electronic transfer from my MOTHER’s bank account in March 2023. This gift value exceeds INR 50000 but within the LRS value of USD 250000.
My query is
1. As this gift came from my MOTHER, am i right in saying that this gift is exempted from Tax? Or is there a tax element to be considered here?
2. Also as already addressed in ‘Vijaya Kumar Nizam’ message above, is it enough, if i declare the above mentioned gift from my mother under the EXEMPTED INCOME of the returns form?
Please advise
I need information with respect to personal tax
Dear sir,
A Individual invested Rs 50,000 with 50% stake in agro farm private limited later it was converted into LLP. that llp holds about 30 acres of agri land with a FMV of Rs 50 lakhs. Now that individual wants to retire from LLP by withdrawing of his capital investmentof Rs 50,000 and another person joining with same capital of Rs 50,000
is there any tax issues will arise on the above transaction
the
We booked a flat on 28/07/2011 to be completed via construction linked plan that allows an unconstructed flat to be sold at lower price and if we stick to the payment plan we will get the flat in few years.
The consideration amount as per the builder was 53,67,500 (also in the allotment letter)
The income tax officer suggests the consideration amount is 65,92,625
We got the possession and completed registry on 28/11/2015
But officer has invoked section 56(2)(vi), and is asking us to pay for income tax for the difference.
On appealing with DRP, we got this reply
“since the conveyance deed was executed on 23.11.2015 and assessee got possession of the property after that therefore the amended provision of 56(2)(vii)(b) would be applicable in this case.”
What is amended provision and Is this justified?
01. WHERE TO SHOW EXEMPTED GIFTS IN INCOME TAX RETURN.
02. CAN HUF ACCEPT GIFTS FROM ITS FAMILY MEMBERS AND FAMILY MEMBERS’ RELATIVES? WOULD THEY EXEMPT GIFTS?
Query No. 1: – Exempted gift will be disclosed under the caption “Exempt Income” in the income tax return. Just select “Any other” from the drop down menu under the section “Nature of Exempt Income. You will be required to provide explanation of gift received under the section “Description”. Next value of gift will be disclosed.
Query No. 2 :- An HUF can receive gift from its members as well as from members’ relative. Members of the HUF is treated as its relative. Thus, any gift received by the HUF from its members is not to be taxed in its hands without any threshold limit. However, as per section 64(2) income arising from the gifted asset is required to be clubbed with the income of the member who has gifted such asset and such income will be excluded from the income of the HUF.
Gift received by the HUF from members’ relative shall be taxable in its hands if the aggregate value of gifts exceeds ₹50,000 during the year as members’ relative is not the relative of the HUF as per the definition.