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Sec. 56 Tax Treatment of Gifts Received by An Individual or HUF

Monetary Gifts

Any sum of money received without consideration (i.e., monetary gift may be received in cash or in kind i.e. cheque, draft, etc.) by an individual/ HUF will be charged to tax if the aggregate value of such sum of money received during the year exceeds Rs. 50,000.

A. Cases in which monetary gift received by an individual or HUF is not chargeable to tax

Monetary gift received by an individual or HUF will not be chargeable to tax if :-

  • It is received from relatives by an individual and from member by HUF
  • It is received on the occasion of the marriage of the individual
  • It is received under will/ by way of inheritance
  • It is received in contemplation of death of the payer or donor
  • It is received from a local authority [as defined in Explanation to section 10(20) of the Income-tax Act]
  • It is received from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in section 10(23C)
  • It is received from a trust or institution registered under section 12AA
  • Share received as a consequences of demerger or amalgamation of a company under clause (vid) or clause (vii) of section 47
  • Share received as a consequences of business reorganization of a co-operative bank under section 47(vicb)

As per Section 2(41) of the Income Tax Act, 1961 “relative” in relation to an individual means 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 descendent of the individual or spouse of the individual or spouse of the persons referred under this section.

Note:- 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. Hence, if the aggregate value of gifts received during the year exceeds Rs. 50,000, then total value of all such gifts received during the year will be chargeable to tax.

B. Tax treatment of immovable property received as gift by an individual or HUF

If Immovable property being land or building or both, is received by an individual or HUF and the stamp duty value of such immovable property received without consideration exceeds Rs. 50,000.

It is to be noted that immovable property is a capital asset with in the meaning of section 2(14) of the Income Tax Act, 1961 for such an individual or HUF

i. Taxability in a case where an immovable property is received for less than its stamp duty value

Any immovable property is acquired by an individual or a HUF and such property is acquired for a consideration but the consideration is less than the stamp duty value and the difference exceeds higher of Rs. 50,000 and 5% of the consideration. In that case the excess of stamp duty value over the purchase price of the property will be treated as income of the purchaser.

It is to be noted that immovable property is a capital asset with in the meaning of section 2(14) of the Income Tax Act, 1961 for such an individual or HUF

ii. Cases in which immovable property received by an individual or HUF is not chargeable to tax

Immovable property received by an individual or HUF will not be chargeable to tax if :-

  • It is received from relatives by an individual and from member by HUF
  • It is received on the occasion of the marriage of the individual
  • It is received under will/ by way of inheritance
  • It is received in contemplation of death of the payer or donor
  • It is received from a local authority [as defined in Explanation to section 10(20) of the Income-tax Act]
  • It is received from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in section 10(23C)
  • It is received from a trust or institution registered under section 12AA

As per Section 2(41) of the Income Tax Act, 1961 “relative” in relation to an individual means 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 descendent of the individual or spouse of the individual or spouse of the persons referred under this section.

C. Tax treatment of movable property received as gift by an individual or HUF

Any movable property received by an individual or HUF will be chargeable to tax if prescribed movable property is received without consideration and the aggregate fair market value of such property received by the taxpayer during the year exceeds Rs. 50,000

According to the Income Tax Act, 1961 “Prescribed movable property” means shares/securities, jewellery, archaeological collections, drawings, paintings, sculptures or any work of art and bullion, being capital asset of the taxpayer

i. Taxability when prescribed movable property is received by an individual or HUF for less than its fair market value

Prescribed movable property received by an individual or HUF will be chargeable to tax if it is acquired by an individual or HUF and the aggregate fair market value of such properties acquired by the taxpayer during the year exceeds the consideration paid for these properties by Rs. 50,000. In other words, the aggregate fair market value of all such properties is higher than the consideration paid and the difference is more than Rs. 50,000.

ii. Cases in which movable property received by an individual or HUF is not chargeable to tax

Immovable property received by an individual or HUF will not be chargeable to tax if :-

  • It is received from relatives by an individual and from member by HUF
  • It is received on the occasion of the marriage of the individual
  • It is received under will/ by way of inheritance
  • It is received in contemplation of death of the payer or donor
  • It is received from a local authority [as defined in Explanation to section 10(20) of the Income-tax Act]
  • It is received from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in section 10(23C)
  • It is received from a trust or institution registered under section 12AA

As per Section 2(41) of the Income Tax Act, 1961 “relative” in relation to an individual means 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 descendent of the individual or spouse of the individual or spouse of the persons referred under this section.

I hope this post would have given you good idea on the gift received by an individual and HUF. If you have any questions related to above referred, please post it in the comments section or send a mail to anujgupta3009@yahoo.in

Categories: Income Tax

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