Income tax act does not specifically define the term gift. The term gift under the act means something that is received without consideration of for inadequate consideration. Section 56 of Income tax Act talks about taxation of gifts. This article will analyse gifts received from different person on different occasion and its tax implication.
1. Gift received on the occasion of marriage –
Gifts received by any Assessee on the occasion of marriage are not taxable. The gift may be received from relative or from any other person. Further the gift may be of any amount. If it is received on account of marriage the gift is not taxable, irrespective of any other factor.
2. Gift received on any other occasion
Gift received on any other occasion is broadly classified into two categories i.e. gift received on any other occasion from relative and gift received on any other occasion from any person other than relative.
2.1 Gift received from relative
Gift received from relative is not taxable, be it on occasion of marriage or otherwise. But the important thing which is to be understood is that the definition of the term relative as discussed under the Income tax act.
– Spouse of individual
– Brother and sister of Individual and their spouse
– Brother and sister of spouse of individual and their spouse
– Brother and sister of either of parents of individual and their spouse
– Any lineal ascendant/ descendant of individual and their spouse
– Any lineal ascendant/ descendant of spouse of individual and their spouse
Gift received from any of the person as described above would be non-taxable in the hands of individual i.e. assessee.
2.2 Gifts received from any person other than relative
The gift received from any person other than relative on any occasion is taxable if it exceeds certain amount. Such kind of gifts are basically divided into two categories i.e. gifts in form of cash and gift in form of property
2.2 A. Gift in form of cash –
Gift received from any person other than relative other than on occasion marriage, if it is in form of cash be taxable if the amount of gift exceeds Rs. 50,000 during the previous year. This is the threshold limit, hence once the amount exceeds Rs. 50,000 the entire value of gift is taxable.
2.3 Gift in form of property –
The gift in property may either be movable or immovable property. Further the gift may be either without consideration or with inadequate consideration. The term property here includes
– Immovable property being land or building or both
– Shares and securities
– Archaeological collection
Work of art
a. Gift of movable property without consideration –
The gift of movable property without consideration will be fully taxable if the fair market value of such gift exceeds Rs. 50,000.
b. Gift of movable property with inadequate consideration –
In this case the gift be taxed if the difference between fair market value and consideration received exceeds Rs. 50,000
c. Gift of immovable property without consideration –
The gift of immovable property without consideration will be fully taxable to the extent of stamp value, if such stamp vale exceeds Rs. 50,000
d. Gift of immovable property with inadequate consideration
The gift if immovable property with inadequate consideration is taxed, if the difference between the stamp value of such property and consideration received exceeds higher of following two
– 10% 0f the actual consideration or
In this way the provision of Gifts under income tax are analysed.