Receiving Gift indeed brings a cheerful smile on the face of the receiver, but if receiver gets to know that he has to pay tax thereon, the smiling face may turn sad.

Although Gift Tax Act has been abolished, however there are certain provisions in the Income Tax Act, which make the gift taxable in the hands of the recipient.

Today we shall share with you certain circumstances when the gift so received is not taxable in the hands of the recipient.

If a person receives Gifts (either in cash or in kind) from any person, gift tax is to be paid by recipient of gift. Such income would be taxable in the year in which the gift is being received and taxable under head income from other sources. After adding the value of Gift so received to income under head other sources, the gross total income would be computed and the tax would be levied on the gross total income as per the income tax slab rates.

A – Exemption from levy of Income Tax on Gift

Income Tax on Gift received by an individual or HUF is governed by provisions of Section 56(ii) of the Income Tax Act. As per the provisions of this Section, Gift Tax will not be levied under the following 7 circumstances:-

1. Gifts received from Relatives

Gift received from Specified Relatives is fully exempted and no income tax would be levied on such Gifts. The persons who constitutes relatives for this purpose are defined as under:

    • 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 Linear ascendant or descendent of the Individual
    • Any Linear ascendant or descendent of the spouse of the Individual
    • Spouse of the person mentioned above

There is no maximum limit on the value of gifts received to be exempted from Gift Tax. All gifts received from relatives (irrespective of value) are exempted from the levy of Gift Tax.

2. If the aggregate value of gifts received is less than Rs. 50,000

Income tax Act has defined Rs. 50,000 as the exemption limit. If the total value of gifts (whether in cash or in kind) received from a persons (except relatives as specified above) in any financial year does not exceed Rs. 50,000/-, then such gift are not liable to Gift Tax. However, if the value of gifts received exceeds Rs. 50,000/-. Then the entire gift so received is taxable as Income from other sources.

3. On the occasion of Marriage of the Individual

Gifts received by an individual on his own marriage are fully exempted from Gift Tax. It has also been clarified that the gifts received by a person on his own marriage are exempted and not on the marriage of their son/daughter/brother/sister.

4. Gift Tax on Property received

Prior to 2009, gifts received in kind were not taxable but now, they are taxable now.

Gift Tax on Assets received in kind would be levied in the following manner:-

  • In case the property is received without any consideration, the stamp duty value/fair market value of the property would be taxable (provided the stamp duty value exceeds Rs. 50,000);
  • In case part consideration is being paid by the person receiving the gift, and the difference between the part payment made and the stamp duty value/fair market value is more than Rs. 50,000/-, such difference would be taxable.

In case of Immovable Properties, the stamp duty value would be considered and in case of Movable Properties, the fair market value would be considered.

The meaning of property has also been defined and Property means:-

  • Immovable Property being land or Building or both
  • Shares and Securities
  • Jewellery
  • Archaeological Collections
  • Drawings
  • Paintings
  • Sculptures
  • Any other work of Art

Tax on Property received as Gift would only be levied in case of the above mentioned properties. Thus, in case any property is not listed above, tax on those properties received as gift would not be levied. Examples of such properties on which gift tax would not be levied are Cars, Laptops, and Mobiles etc.

5. Gifts received under a Will or by way of Inheritance or in contemplation of death of the payer

Any amount received under a will or by way of inheritance or in contemplation of death of the payer is fully exempted in the hands of the person receiving the gift. There is no maximum limit in this case and the whole gift received is considered as tax free.

6. Gifts received from any Local Authority as defined in Section 10(20) is also exempt.

7. Gifts received from any fund or foundation or university or other education institution or hospital or other medical institution or any other trust or institution referred to in section 10(23C) or Gifts received from any fund or Institution registered under Section 12AA

B – Capital Gains on Assets received/transferred as Gifts

In the hands of the person giving the gift

If a person gives gifts to another, then such gift would not be regarded as transfer and therefore no capital gains would arise in the hands of the transferor i.e. the person who is giving the gift. And therefore, at the time of giving the gift, no tax would be required to be paid by the person giving the gift.

In the hands of the person receiving the gift

  • The Cost of acquisition in the hands of the person receiving the gift would be the same as the cost of acquisition in the hands of the person who gave the gift.
  • For the computation of period of holding, the period of holding in the hands of the person giving the gift would also be included.

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XPERT CONSULTING – Tax Consultants

E: contact@xpertconsulting.biz

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Tags : Gift (93) gift from relatives (40) gift in kind (37) section 56 (125) Tax on Gift (50)

15 responses to “Income Tax on Gifts: Exemptions and computation”

  1. SOBHANA says:

    A INDIVIDUAL GIFTING NON RELATIVE UNLISTED SHARES MARKET VALUSE 6 LAKHS(FV 50000 ONLY)WHAT WILL BE THE TAX LIABILITY.
    2.THIS DEALINGS FOR COMPENSATING OLD SHARE DEALINGS AND EXECUTING AGREEMENT .WHAT WILL BE TH ETAX IMPLICATION.

  2. Vipul Shah says:

    Hi,
    My son received a gift of car from car manufacturer.
    As per exemption mentioned in last paragraph of exemption 4, it is mentioned that on car there is no gift tax levied.
    Under which section, gazette, circular of income tax/gift tax it is claimed to be as waiver.

  3. Online says:

    Hi,I have a question…If I invest 1.5 lacs in senior citizen savings scheme in my parent’s name,can she claim tax benefit of 80c for that??Suppose her total income from other sources are 3 lacs per annum.Please explain.

  4. Online says:

    Hi,I have a question…If I invest 1.5 lacs in senior citizen savings scheme in my parent’s name,can she claim tax benefit of 80c for that??

  5. Sudeep Kumar says:

    I have received 5 Lakh as Gift from my uncle’s will. Whether it will be taxable?
    Further more if I transfer this amount in my other own account, whether the amount or transaction is taxable.

  6. sunil nigam says:

    If brothers of a married girl (Non I Tax Payee) Gift an amount of say five lacs or more in a Financial year, what are the implications & steps to be taken at either end.Pertaining to FY 2014-15 OR 2015-16.

  7. Rajesh shah says:

    I would like to gift a piece of land to my own Brother’s son’s wife ( MY nephew’s wife). Is it exempted from Income tax ?

    Rajesh shah

  8. Ashish says:

    Dear sir

    If a married doughter received some lakhs (cash/ cheque) from her father. Is it falls under gift tax or income tax.

  9. alok says:

    Mr. A (Father in law ) gifted a Household property to his daughter in law (B) in 30.6.2006. Stamp duty value at that time is Rs. 400000/- B paid the stamp duty on Rs. 400000/- and gift deed was registered in her name.

    Now in 30.6.2014 She(B) sold the property for Rs. 65 Lacs and on 30.9.2014 she (B) purchased a new house for Rs. 80 lacs.

    Let me know the tax position

  10. rashmi acharya says:

    what will be the implication if gift is received outside India by cheque and said cheque is sent by some friend to assesse in India???????????

  11. Avardhana says:

    u/s 50C the seller has to pay capital gains tax on the stamp value of the property sold even if he has not recd the amount(no inflow) and u/s 57 the income of the purchaser gets added such value, difference between the declared value and stamp duty value, even if he has not paid that amount(no outflow). This is applicable to only individuals and not to firm, co etc.

  12. Naveen says:

    Please inform if the Gifts received by HUF from the above list of relatives of Coparcners of HUF will be exempt?

  13. Pranam Shah says:

    What if the Gift is received from HUF to it’s Karta/coparcener/members ?

  14. N L N SWAMY says:

    sir,
    if a person gifts to brother in different times in a year and confirms the fact before the assessing officer , who denied and entire gift added in the hands of assessee donee , which now disputed in appeal before the cit (A) is pending. Is there any relevant decisions of high cout .pl advise how to tackle the issue before the appellate authority
    N.L.NSWAMY
    ADVOCATE&TAX CONSULTANT
    9291552595

  15. DAYANANDA KULKARNI says:

    REALLY THE MATTER REGARDING THE GIFT AND ITS EFFECT IS VERY USEFUL IN TAX PLANNING. THANK YOU FOR THE SAME

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