Sonu Aggarwal

Taxation of gift received Under Section 56(2) of income tax act 1961

Taxation on gift provided U/S 56(2) of income tax act 1961.

As per income tax act gifts received are taxable in the hands of recipient under the head of other Sources and there is no taxation for the donor.

Here gift means any sum of money, Moveable property or immovable property which received without consideration or inadequate consideration.

Here property term include the following

  • Land and building (immovable)
  • Shares and securities (Securities Include debenture, bonds etc).
  • Jewellery (Jewellery includes ornaments made of gold, silver, platinum or any other precious metal whether or not attach any precious or semi-precious stone, and whether or not worked or sewn into any wearing apparel .Precious or semi-precious stones also include in the term of jewelry, whether it is set or not in any furniture, utensil or other article or worked or sewn into any wearing apparel)
  • Archeological collection
  • Drawings
  • Paintings
  • Sculpture
  • Any work of art
  • Bullion (Gold And silver in their purest form)

There are some rules provided by income tax act 1961 for taxation on gift whether gift is taxable or not. For simplification I   divided this rules in two head

i. Exempted Gift

ii.  Taxable Gifts

Exempted Gift

Any sum of amount received (as gift) without consideration up to Rs 50000 in one year is not taxable at anywhere. Further following receipts without consideration are also not income :

i. from any relative

ii. Gifts received on the occasion of marriage of an individual even from non relatives are not an income

iii. under a Will or by way of inheritance;

iv. in contemplation of death of payer;

v. from local authority as defined in Explanation to section 10(20);

vi. educational or medical institution or fund etc. referred to u/s. 10(23C);

vii. trust or institution registered u/s. 12AA.

viii. by any fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10; or

ix.   by way of transaction not regarded as transfer under clause (i) or 11[clause (iv) or clause (v) orclause (vi) or clause (via) or clause (viaa) or clause (vib) or clause (vic) or clause (vica) or clause (vicb) or clause (vid) or clause (vii) of section 47; or

x. from an individual by a trust created or established solely for the benefit of relative of the individual.

 The “relatives” term defines by the Income Tax act as follows :

i. Spouse of the individual

ii. Brother or sister of the individual

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).

viii. In case of a Hindu undivided family, any member thereof;

For Example:

If one of your friend gift u Rs 40000 and another one gift u 10000 then there is no need to pay tax, but if such (gift Received) amount exceeds Rs 50000 than whole amount of money will be taxable

E.g: If one of your friend gift u Rs 40000 and another one gift u 20000 then the whole 60000 shall be taxable and recipient has to pay tax as per his slab rate

Conclusion

Any amount received as gift up to Rs 50000 in one year is not taxable in the hand of recipient. But if amount exceeds Rs 50000 than whole received amount will be taxable. There is limit provided on amount Received in one year as a gift not on amount received by per person

Gift Received from Relative

Any sum of money or kind received as gift from relatives will not be taxable at all means there is no limit specified for amount (gift) received by relative hence any amount received by relatives is not taxable

e.g If your brother gift u Rs 50, 00,000  than it will not be taxable in the hand of recipient (you).

Gift received On occasion of the marriage of the individual

Gift received by any person (without limit) on the occasion of the marriage is tax free in the hand of individual (recipient).

For example: if your friend or relative or any other person gift u on your marriage than nothing will be taxable.

Gift received under a will or by way of inheritance

Any sum of money or any property is received under a will or by way of inheritance it is totally exempt from Gift Tax. So if any person gets a Property worth Rs 50, 00,000 and some other things worth Rs 30, 00,000 through inheritance, than he will not have to pay any tax on such gift received.

In contemplation of death of the payer

Any sum of money or any property is received in contemplation of death is also exempt from gift tax.

A gift received in contemplation of death means when men, who is ill and expects to die shortly because of his illness, give his movable property possession to another to keep as a gift in case if he will die because of that illness.

Such a gift may be resumed by the giver; and shall not take effect if he recovers from the illness during which it was made; nor if he survives the person to whom it was made.

Any local authority, trust or university etc.                 

There is no tax liability occur when any amount received from local authority trust or university as a gift hence recipient  is not liable to pay tax on such gift.

Conclusion

Any amount received up to Rs 50000 or

Immovable property received (which stamp duty value is up to Rs 50000) or

Movable property received which FMV up to Rs 50000 in one year is not taxable in the hand of recipient. But if amount and value exceeds Rs 50000 than whole received amount and property value will be taxable.

Note

Only single transaction is considered for calculating threshold limit of Rs.50000/- In the case of immovable property received as a gift. Where as in other cases (cash or movable property) all transactions in financial year are taken into consideration for calculating threshold limit of Rs.50000/-

Taxable gift

  • When any amount received exceeds Rs 50000 (from other than specified relatives) than whole received amount will be taxable or
  • Any immovable property is received without consideration if stamp duty value of such property is more than Rs.50000/- than stamp duty value of such property will be taxable.

Here Stamp Duty Value means the value adopted or assessed or assessable by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property.

For Simplification if  property purchase value is 50lac but for the purpose of valuation of stamp duty it is taken by authority 65lac than in the case of gift received such property value  65 lac will be taken and tax will be charge on 65 lac value.

  • If any immovable property is received for a inadequate consideration, (means consideration is less than stamp duty value of property) which stamp duty value exceeding Rs.50, 000, the stamp duty value of such property as Exceeds such consideration will be chargeable.
  • For example if consideration paid 120000 and stamp duty value is 200000 than 80000 will be chargeable u/h other sources.

However wef A.y 2019-20, the above provision has been amended which is as follows:U/s 562(x)

If any immovable property is received For a consideration , the stamp duty value of which exceeds  105 percent of the consideration and the difference between stamp duty and consideration exceeds Rs 50000, than the difference amount between stamp duty and consideration  shall be taxable as income from other source.

It should be noted that, that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes provided that the the amount of consideration for the said immovable property , or a part thereof, has been paid by any mode other than cash on or before the date of the agreement for the transfer of such immovable property.

2. Movable property is received without consideration which aggregate fair market value is more than Rs.50000/- than tax will be charge on aggregate fair market value of movable property.

If movable property received for a lesser consideration, means consideration is less than the Fair market value but Fair market value exceeds by Rs.50, 000, than the fmv as exceeds such consideration will be chargeable to tax.

For example if Gold Jewellery Rs 1050000 received for consideration 200000 than whole 850000 will be taxable in the hand of recipient.

Also Read:

gift deed format/gift received tax-liability

S.56 pertaining to gifts, deemed gifts / under-valuations

Sec. 56(2)(viib) not applicable to startups having paid up share capital upto Rs. 10 crore

Taxation of Gift- Under Income Tax

(Republished With Amendments)

(Author can be reached at sonuaggarwal08 @ gmail.com)

More Under Income Tax

49 Comments

  1. Faraz Ansari says:

    I purchased a property by way of saledeed for inadequate consideration i.e. less than its stamp duty value from my father and his brothers.
    However I paid full stamp duty as during registeration.
    How this case would be dealt from income tax point of view?
    Do the sellers i.e. my and uncle have to pay any taxes or do i have to pay any tax?

  2. Mansi Tyagi says:

    Mother and daughter are relatives.
    So any gift received from mother is not taxable in the hands of daughter.
    Therefore it is not mandatory to show it as income.
    If you want to disclose it in ITR then show it as exempt income.

  3. Nandakumar Shenoy says:

    My mother has gifted me an amount of Rs. 3.00 Lakhs for marriage of my daughter. Whether I should show this as an income in ITR. If so is there any section in which this can be claimed as exempt income?

    1. Mansi Tyagi says:

      Mother and daughter are relatives.
      So any gift received from mother is not taxable in the hands of daughter.
      Therefore it is not mandatory to show it as income.
      If you want to disclose it in ITR then show it as exempt income.

  4. D.D.Bunker says:

    Is Deduction under Income Tax section 56(2)V available in ITR 1/ITR 2 ?If not where it will deduct in return from taxable income of the father?Please guide me.
    Thanks.

  5. MEER IRFAN ALI says:

    A person has performed ear boring ceremony to his daughter and received cash gift from relatives and friends to the tune of Rs.45 lakhs. The gift amount ranges from Rs.500 to 3 lakhs. Is it taxable in the hands of the recipient? If it is exempted income, under what Section?

    1. Suraj says:

      Gifts,whether cash or in kind,from relatives is exempt u/s 56(2)(X).
      Gifts received from relatives plus outsiders is exempt provided that such gifts are received only on the occasion of MERRIAGE u/s 56(2)(X).In your case the ceremony you mentioned if is marriage,then all the gifts are exempt.

      There is NO threshold limit on the value of gifts in the above two cases.

  6. Arjun Mandavkar says:

    1. Gift from father to daughter is taxable

    2. divorce settlement amount received is taxable or not if not under which section

  7. Vaibhav says:

    Can gift received from mother be considered as “income” and needs to be shown as ‘Exempt Income’ for reporting purpose? Or there is no need to show it anywhere while filing returns if it is not considered as income?

  8. deepu says:

    Sir, my mother has brought a vacant land in Bangalore in 1995. All most 22 years land.

    Now we have sold the land for Rs. 30,00,000/- to one of the purchaser on 12th Sept 2017.

    My mother age is approx 55 – 60 years.

    Please inform whether we need to pay income tax.

    if my mother divides the amount equally to my sister and their daughters whether we need to pay tax or it will treat as gift.

    Also please inform how to exempt tax.

    We are very poor and trying to sell land for my sister daughters marriage of 2 siblings.

    if we gift the amount for them equally whether it is exempted from income tax. Please help us.

  9. Sufiyan Ansari says:

    Hi,
    Do Inheritance or will of an ill person ,received by the third person who is not realted to that person by anyways basically , Owner of a flat who has 1.5 lakh inbank account who has a nominee , his maid she will be receiving the Amount after his death willthat be taxable in the hands of the recepient
    Regards,

  10. Sufi says:

    Hi,
    Do Inheritance or will of an ill person ,received by the third person who is not realted to that person by anyways basically , Owner of a flat who has 1.5 lakh inbank account who has a nominee , his maid she will be receiving the Amount after his death willthat be taxable in the hands of the recepient
    Regards,

  11. AS says:

    Hi, Till what time from marriage date can we report that income in the return ? Is it the end of financial year or 1 year from marriage date?

  12. Samridh Jain says:

    Sir i got a car in a gift from my friend would this transaction attract any tax liability ?
    Because As per definition of movable goods gift Definition is exhaustive and not includes car in it….so as per my interpretation this is not attract any tax liability…
    so i want to know my contention is appropriate or not as per IT Act 1961?

  13. Sonu Aggarwal says:

    As per section 56(2) (Vii) if any some received from specified person ( as relative) under income tax Act then it will not be taxable hence 40000 received from relative will not be taxable and 30000 from non relative is less than 50000 hence there is also no liability arise of tax on such 30000 therefore there is no tax liability.
    Hope so you will satisfy with reply and if you have any further query you can mail me at sonuaggarwal08@gmail.com

    1. Sonu Aggarwal says:

      As Per Relative Definition Brother Child is not consider Relative under Income Tax hence Gift received from him is taxable if it’s more than 50000.as you asked about exact 50000 then it will not be taxable if you did not get any other amout from non relative in same year.

  14. RAMESH MUTNEJA says:

    SIR MY AUNTY GIFTED AND A IMMOVABLE PROPERTY TO ME.THIS PROPERTY WAS GIFTED TO HER BY HER SON TWO MONTHS BEFORE.IS THERE ANY LEGAL PROBLEM OR THIS IS O.K..PLEASE GUIDE ME
    BLREGARDS

  15. NAMDEV GAWDE says:

    Dear Sir,

    Pl let me know calculation of Gift tax giving example. Inherited property sold. Is it necessary that capital gain to be paid. Pl let me know urgently.

  16. Raj says:

    Dear Sir,

    In case the gift is immovable agriculture land property and it is register with paying the stamp study. In such case, do we need to pay the tax on gift deed.

    Need solution !!!

  17. Arup says:

    Dear Sonuji,

    In case of NGO , when we received many goods/things as gifts-in-kinds then whether the donor of such gifts-in-kinds enjoys any income tax exemption or not under section Income Tax Act ? If they eligible for exemption, then what would be the particular section of I.T. Laws ? …. Arup

  18. Arup says:

    Dear Sonuji,

    In case of NGO , when we received many goods/things as gifts-in-kinds then whether the donor of such gifts-in-kinds enjoys any income tax exemption or not under section Income Tax Act ? If they eligible for exemption, then what would be the particular section of I.T. Laws ?

  19. B T TOPRANI says:

    What will be tax implication if my daughter ( married and earning at abroad ) send me Rs. 5,00,000 /- in one financial year…I am also earning person in India..
    Kindly arrange to reply at an early…thanks

  20. atul garg says:

    I would like to know the tax implication in following case:

    Case 1 : I am in receipt of Rs 10 Lakh from overseas in my saving account as a business loan. Please let me know how can i utilize this fund as my working capital for starting a new business?

    Case 2: Recieve money as a gift from my father’s sister residing in foreign country, will it be required to show any document for transfer?

  21. Ronak Patel says:

    Dear Sir,

    My company is BPO & Agents get the salary with incentives.
    In Incentives there are three types
    1) Cash Incentive
    2) Monthly Incentive
    3) Quarterly Incentive (in form of Gifts it can be Mobile Phones, TV, Laptops etc.)

    So sir my question is Quarterly Incentive is taxable or not?

  22. ashu says:

    hi my uncle means my my mother’s elder sister’s husband wants to give me his flat by gift deed. property valuation is around 8500000. stamp duty and registration charges on this property is 550000. is this gift deed is taxable for donor and donee?? and if yes then how much tax? how to calculate
    plz reply

  23. V.C. Sekakr says:

    If I gift my son (who is 21 years old and do not have a job) a sum of Rs.25,00,000/- and if he keep that amount with him in FD Account with the Bank whether the amount of Rs.25,00,000/- will be a taxable income for my son? When he gets the interest and that amount is taxable for him. Please let me have your reply at the earliest.

  24. 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

  25. stocks_profit says:

    i have a trading account and little knowledge and experience in trading . so, my friend gave me 100000 rs through net banking to trade. he is a employee, he is not supposed to indulge in trading in stockmarket . we made profits and the amount is 1600000. after removing taxes according to slab rates 2014-15 is 1285850 rs . we want to share this in equal halfs, 642925 rs each. now the problem is how to give this money to my friend with out any further taxation and he should have it as white money . can i give this amount as a loan @ 0 persent without any time limit and forget or any better ideas to give money to him .he is already married, so cant use that technique. what is procedure to give loan

  26. Sonu Aggarwal says:

    Dear Gourav Agrawal ,
    As you asked that car is taxable or not it is not taxable because it is not include in definition of movable property & thanks for consideration in my mind that i have use car example wrongly for only example purpose . Further I cleared that Following Item (Received as gift) not taxable.
    Motor cars
    Electronics
    Furniture
    Air tickets etc.
    Because above all gift have still been kept out of the tax purview and you can thus enjoy the luxury of receiving gifts of any of these.

    Thanks & Regards
    Sonu Aggarwal
    Sonuaggarwal08@gmail.com

  27. Gourav Agrawal says:

    Dear,
    as per defination of property (movable) Car is not include in defination..but as you mention in your example it is taxable.
    So, please clearify is it taxable or not ?

  28. Aakash Gilda says:

    If i do not maintain the document.There should be no problem to officer as i am showing income rather than concealing the income.So do you think there would be problem if do not maintain any document.
    As i am receiving from my grand mother,she cant sign so ?

    1. Sonu Aggarwal says:

      Dear Aakash Gilda,
      As i given answer before that no gift deed is manadatory it is optional but There should be proof that you have received gift so you have to maintain documents for your safeguard and for further query by income tax department.

      Thanks & Regards
      Sonu Aggarwal
      Sonuaggarwal08@gmail.com

  29. Sonu Aggarwal says:

    Dear Aaksah Gilda,
    As Per My knowledge cash or cheque does not mandatory requires to be executed through a gift deed because it is optional which protect against any income tax scrutiny .However A note in plain paper is sufficient which include following
    mention the names of persons, their relation and that the gift is being given out of love and affection.

  30. Sonu Aggarwal says:

    Dear Aakash Gilda
    As per My knowledge I am Replying your query answer
    Gift made by way of cash or cheque does not mandatory requires gift deed. Writing a plain typed note on a paper will generally sufficient. It is not required to be stamped and registration as gift deed. You may simply mention the names of persons, their relation and that the gift is being given out of love and affection.
    There is not much to worry if yod done transaction which can be justify .However its always a good and safe practice to document things on a paper with proper signatures.

  31. Aakash Gilda says:

    Is any documentation is to be done for cash gift of Rs.50000 or below received from any of the person.i.e gift deed or or any such document?

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