With effect from A.Y. 2005-06, a concept of levying income-tax on the gifts received by an individual or HUF was introduced in Section 56 (2) of the Act. This was done to combat certain misuse of the provisions where the gift was received from a non-relative. At first the said concept was introduced for taxing gift in cash alone. However, consistently the scope of the said gifts has been enlarged. With effect from 1st October, 2009, the provisions not only cover the cases of gifts in cash, but also include the cases of gifts received by an individual or HUF in kind, being gift of immovable property (land or building or both), shares and securities, jewellery, archeological collection, paintings, sculptures or work of art (“Specified Properties”). The provisions are applicable only where the value of the gift exceeds Rs. 50,000 and is given at times other than specified occasions.
Amendments are sought to be made in this scheme of taxation:
- Transfer of immovable property without consideration or for inadequate consideration was chargeable to tax with reference to the stamp duty valuation as determined u/s. 50C of the Act. The present provisions also cover cases where a person purchases the property at a value lesser than the value which is determined by the stamp duty authorities. The Bill proposes to retain tax only on transfer of immovable property without consideration. Cases of transfer of immoveable property for inadequate consideration are no longer covered by these provisions since such transactions would in any case fall squarely within the ambit of S.50C.
- Section 56(2) has been amended to cover only transfer of capital assets and not stock-in-trade. Therefore, transfer of stock-in-trade would not attract the taxability provisions under section 56(2). This amendment is based on the logical reasoning that a person cannot be compelled to always earn profit in a business transaction.
- Further, the definition of the Specified Properties has expanded by including “bullion” in the definition and accordingly now the gift of bullion (earlier only jewellery was included whereas bullion was not included) also will be chargeable to tax in the hands of the recipient.
