Tax Treatment of Gifts Received By an Individual or HUF: Rules & Exceptions

The tax treatment of gifts received by individuals or Hindu Undivided Families (HUFs) is a complex and often misunderstood area of taxation. This comprehensive guide explores the intricate rules governing the taxability of monetary gifts, immovable property, and movable property. It delves into exceptions where certain gifts are not charged to tax, such as those received on the occasion of marriage. Additionally, it provides insights into the tax treatment of gifts received from abroad, the implications of exceeding an annual gift value threshold, and special provisions for COVID-19 patients and their families. Understanding these rules and exceptions is essential for informed financial planning and compliance with tax regulations.

Tax Treatment of Gifts Received By An Individual or HUF

A very common and frequent question running in the mind of taxpayers is the taxability of gifts. In this part, you can gain knowledge about various provisions relating to taxability of gift received by an individual or a Hindu Undivided Family (HUF) i.e. sum of money or property received by an individual or a HUF without consideration or a case in which the property is acquired for inadequate consideration.

From the taxation point of view, gift can be classified as follows:

1. Any sum of money received without consideration, it can be termed as ‘monetary gift’.

2. Specified movable properties received without consideration, it can be termed as ‘gift of movable property’.

3. Specified movable properties received at a reduced price (i.e. for inadequate consideration), it can be termed as ‘movable property received for less than its fair market value’.

4. Immovable properties received without consideration, it can be termed as ‘gift of immovable property’.

5. Immovable properties acquired at a reduced price (i.e. for inadequate consideration), it can be termed as ‘immovable property received for less than its stamp duty value’.

1. Tax treatment of monetary gifts received by an individual or Hindu Undivided Family (HUF)

If the following conditions are satisfied then any sum of money received without consideration (i.e., monetary gift may be received in cash, cheque, draft, etc.) by an individual/ HUF will be charged to tax:

• Sum of money received without consideration.
• The aggregate value of such sum of money received during the year exceeds Rs. 50,000.

Though the provisions relating to gift applies in case of every person, but it has been reported that gifts by a resident person to a non-resident are claimed to be non-taxable in India as the income does not accrue or arise in India. To ensure that such gifts made by residents to a non-resident person are subjected to tax in India, the Finance (No. 2) Act, 2019 has inserted a new clause (viii) under Section 9 of the Income-tax Act to provide that any income arising outside India, being money paid without consideration on or after 05-07-2019, by a person resident in India to a non-resident or a foreign company shall be deemed to accrue or arise in India.

2. Cases in which sum of money received without consideration, i.e., monetary gift received by an individual or HUF is not charged to tax

In following cases, monetary gift received by an individual or HUF will not be charged to tax:-

1) Money received from relatives.

Relative for this purpose means:

i. In case of an Individual

a. Spouse of the individual;

b. Brother or sister of the individual;

c. Brother or sister of the spouse of the individual;

d. Brother or sister of either of the parents of the individual;

e. Any lineal ascendant or descendent of the individual;

f. Any lineal ascendant or descendent of the spouse of the individual;

g. Spouse of the persons referred to in (b) to (f).

ii. In case of HUF, any member thereof.

2) Money received on the occasion of the marriage of the individual.

3) Money received under will/ by way of inheritance.

4) Money received in contemplation of death of the payer or donor.

5) Money received from a local authority [as defined in Explanation to section 10(20) of the Income-tax Act].

6) Money received from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in section 10(23C). [w.e.f. AY 2023-24, this exemption is not available if a sum of money is received by a specified person referred to in section 13(3)]

7) Money received from or by a trust or institution registered under section 12A, 12AA or section 12AB [w.e.f. AY 2023-24, this exemption is not available if a sum of money is received by a specified person referred to in section 13(3)].

8) Money received by any fund or trust or institution any university or other educational institution or any hospital or other medical institution referred to in section 10(23C)(iv)/(v)/(vi)/(via).

9) Money received as a consequences of demerger or amalgamation of a company or business reorganization of a co-operative bank under section 47.

3. Marriage of the individual is the only occasion when monetary gift received by him will not be charged to tax

Gift received on the occasion of marriage of the individual is not charged to tax. Apart from marriage there is no other occasion when monetary gift received by an individual is not charged to tax. Hence, monetary gift received on occasions like birthday, anniversary, etc. will be charged to tax.

4. Taxability of monetary gifts received from friends

Gifts received from relatives are not charged to tax (Meaning of ‘relative’ has been discussed earlier). Friend is not a ‘relative’ as defined in the above list and hence, gift received from friends will be charged to tax (if other criteria of taxing gift are satisfied).

5. Taxability of Monetary gifts received from abroad

If the aggregate value of monetary gift received during the year by an individual or HUF exceeds Rs. 50,000 and the gifts are not covered under the exceptions discussed in earlier part, then gifts whether received from India or abroad will be charged to tax.

6. Once the aggregate value of gifts received during the year exceeds Rs. 50,000 then all gifts are charged to tax

Sum of money received without consideration by an individual or HUF is chargeable to tax if the aggregate value of such sum received during the year exceeds Rs. 50,000.

The important point to be noted in this regard is the “aggregate value of such sum received during the year”. 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 charged to tax (i.e. the total amount of gift and not the amount in excess of Rs. 50,000).

Illustration

Mr. Kumar received following gifts during the financial year 2023-24:

> Rs. 1,84,000 from his friend residing in Canada.

> Rs. 25,200 from his elder brother residing in Delhi.

> Rs. 84,000 from his friend residing in Delhi (received on the occasion of birthday of Mr. Kumar).

What will be the tax treatment of above items in the hands of Mr. Kumar?

Sum of money received without consideration (i.e. gift) by an Individual or a HUF from any person other than relative (meaning of relative is already discussed earlier) and otherwise than on prescribed occasions (as discussed earlier) is charged to tax, if the aggregate amount of such gift received during the year exceeds Rs. 50,000. Considering these provisions, the tax treatment of gifts in the hands of Mr. Kumar will be as follows:

> Rs. 1,84,000 received from his friend will be fully taxed because friend is not covered in the definition of ‘relative’.

> Rs. 25,200 received from elder brother will not be charged to tax because elder brother is covered in the definition of ‘relative’.

> Birthday is not covered in the list of prescribed occasion on which gift is not charged to tax, hence Rs.84,000 received on the occasion of birthday will be fully taxed.

Illustration

During the financial year 2023-24, Mr. Raja received the following gifts from his friends:

> Rs. 25,000 on 1-5-2023

> Rs. 18,000 on 20-12-2023

What will be the tax treatment of above gifts?

Sum of money received without consideration (i.e. gift) by an Individual or a HUF from any person other than relative (meaning of relative has been discussed earlier) and otherwise than on prescribed occasions (as discussed earlier) is charged to tax, if the aggregate amount of such gift received during the year exceeds Rs. 50,000.

Friends are not covered in the definition of relative. Further, birthday is not covered in the list of prescribed occasion on which gift is not charged to tax and hence, gift received from friends will be charged to tax. However, nothing will be charged to tax, if the aggregate amount of gift received during the year does not exceed Rs. 50,000.

The aggregate amount of gift received by Mr. Raja during the year amounts to Rs. 43,000 (Rs. 25,000 + Rs. 18,000) which is below Rs. 50,000, hence, nothing will be charged to tax in the hands of Mr. Raja.

Suppose, if in the given case, the amount of second gift is Rs. 28,000 instead of Rs. 18,000, then the aggregate amount of gift will come to Rs. 53,000 (Rs. 25,000 + Rs. 28,000). In this case, entire amount of Rs. 53,000 will be charged to tax in the hands of Mr. Raja.

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

If the following conditions are satisfied than immovable property received without consideration by an individual or HUF will be charged to tax:

1) Immovable property, being land or building or both, is received by an individual/HUF.

2) The immovable property is a capital asset within the meaning of section 2(14) for such an individual or HUF.

3) The stamp duty value of such immovable property received without consideration exceeds Rs. 50,000.

8. When immovable property received by an individual or HUF without consideration (i.e. by way of gift) is not charged to tax

In following cases, gift of immovable property will not be charged to tax. 1)

Property received from relatives.

Relative for this purpose means:

i. In case of an Individual

a. Spouse of the individual;

b. Brother or sister of the individual;

c. Brother or sister of the spouse of the individual;

d. Brother or sister of either of the parents of the individual;

e. Any lineal ascendant or descendent of the individual;

f. Any lineal ascendant or descendent of the spouse of the individual;

g. Spouse of the persons referred to in (b) to (f).

ii. In case of HUF, any member thereof.

2) Property received on the occasion of the marriage of the individual.

3) Property received under will/ by way of inheritance.

4) Property received in contemplation of death of the donor.

5) Property received from a local authority [as defined in Explanation to section 10(20) of the Income-tax Act].

6) Property received from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in section 10(23C) [w.e.f. AY 2023-24, this exemption is not available if property is received by a specified person referred to in section 13(3)].

7) Property received from a trust or institution registered under section 12AA or section 12AB [w.e.f. AY 2023-24, this exemption is not available if property is received by a specified person referred to in section 13(3)].

9. Marriage of individual is the only occasion when gift received by him will not be charged to tax

Gift (i.e. immovable property received without consideration) received only on the occasion of marriage of the individual is not charged to tax. Apart from marriage there is no other occasion when gift received by an individual is not chargeable to tax. Hence, immovable property received on occasions like birthday, anniversary, etc., without any consideration will be charged to tax.

10. Taxability of immovable property received without consideration i.e., gift from friends

Gifts (i.e. immovable property received without consideration) received from relatives are not charged to tax (meaning of relative has been discussed earlier). Friend is not a relative as defined in the above list and hence, gift received from friends will be charged to tax (if other criteria of taxing gift are satisfied).

11. Tax treatment of gift of immovable property located abroad

If the conditions discussed in earlier part (regarding the taxability of gift of immovable property) are satisfied, then gift of immovable property will be charged to tax whether the property is located in India or abroad.

Illustration

An Individual received a gift of flat from his friend. The stamp duty value of the flat is Rs. 84,000. In this case whether the total value of gifted property will be charged to tax or only the value in excess of Rs. 50,000 will be charged to tax?

If the conditions discussed in earlier part (regarding the taxability of gift of immovable property) are satisfied, then the entire stamp duty value of immovable property received without consideration, i.e., received as gift will be charged to tax. Once the taxability is attracted, i.e., stamp duty value of property received as gift exceeds Rs. 50,000, than the entire stamp duty value of the property is chargeable to tax. Hence, in this case entire stamp duty value of property, i.e., Rs. 84,000 will be charged to tax.

Illustration

On 1-5-2023, Mr. Kumar gifted his house to his friend Mr. Raja. The market value of the building was Rs. 8,40,000 and the value of the building adopted by the Stamp Valuation Authority for charging stamp duty was Rs. 9,00,000. Advice Mr. Raja regarding the tax treatment in this case.

If the following conditions are satisfied then immovable property received by an individual or HUF will be charged to tax:

1) Immovable property, being land or building or both, is received by an individual/HUF.

2) The immovable property is a ‘capital asset’ within the meaning of section 2(14) for such an individual or HUF.

3) The stamp duty value of such immovable property received without consideration exceeds Rs. 50,000.

The above provisions are not applicable in case of immovable property received from relatives and immovable property received on certain specified occasions.

In the given case, the property is a capital asset for Mr. Raja, the property is received from his friend (friend is not covered in the definition of relative), property is not received on any specified occasions and the stamp duty value of the property exceeds Rs. 50,000. In other words, all the conditions required to tax the gift are satisfied and hence the stamp duty value of the property i.e. Rs. 9,00,000 will be charged to tax in the hands of Mr. Raja. It will be charged to tax under the head “Income from other sources”.

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

Apart from taxing immovable property received without consideration, i.e., received as gift, the Income-tax Act has also designed provisions for taxing immovable property received for less than its stamp duty value. If following conditions are satisfied, then immovable property received by an individual or HUF for less than its stamp duty value will be charged to tax:

1) Any immovable property is acquired by an individual or a HUF.

2) The immovable property is a ‘capital asset’ within the meaning of section 2(14) of the Act for such individual or HUF.

3) 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.

Note: The Finance Act, 2020 has increase the safe harbor limit of 5% to 10% w.e.f. Assessment Year 2021-22

13. Faceless Prosecutions

To impart greater efficiency, transparency and accountability for the purpose of granting sanction for prosecution or compounding of offences, the Central Government may make a scheme by:

a) Eliminating the interface between the income-tax authority and the assessee or any other person to the extent technologically feasible;

b) Optimizing utilization of the resources through economics of scale and functional specialization;

c) Introducing a team-based sanction to proceed against, or for compounding of, an offence, with dynamic jurisdiction.

The Central Government may, for the purpose of giving effect to the scheme, issue notification in the Official Gazette, to direct that any of the provisions of this Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification.

Such directions are to be issued on or before 31st March, 2022. Further, every notification issued shall, as soon as may be after the notification is issued, be laid before each House of Parliament.

In above case the excess of stamp duty value over the purchase price of the property will be treated as income of the purchaser.

14. When immovable property received by an individual or HUF for less than its stamp duty value is not charged to tax

1) In following cases, nothing will be charged to tax in respect of immovable property received for less than its stamp duty value :

Property received from relatives.

Relative for this purpose means:

i. In case of an Individual

a. Spouse of the individual;

b, Brother or sister of the individual;

c. Brother or sister of the spouse of the individual;

d. Brother or sister of either of the parents of the individual;

e. Any lineal ascendant or descendent of the individual;

f. Any lineal ascendant or descendent of the spouse of the individual;

g. Spouse of the persons referred to in (b) to (f).

ii. In case of HUF, any member thereof.

2) Property received on the occasion of the marriage of the individual.

3) Property received under will/ by way of inheritance.

4) Property received in contemplation of death of the donor.

5) Property received from a local authority [as defined \in Explanation to section 10(20) of the Income-tax Act].

6) Property received from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in section 10(23C) [w.e.f. AY 2023-24, this exemption is not available if property is received by a specified person referred to in section 13(3)].

7) Property received from a trust or institution registered under section 12A 12AA or section 12AB [w.e.f. AY 2023-24, this exemption is not available if property is received by a specified person referred to in section 13(3)].

8) Property received by any fund /trust/university/other educational institutions/hospital/other medical institution referred to in section 10(23C)(iv)/(v)/(vi)/(via)(Applicable if Property is received on or after 1^st April 2017)

9) Property received by way of transaction not regarded as transfer under clause (viiac)/(viiad)/(viiae)/(viiaf) of section 47.

10) Property received from an individual by a trust created or established solely for the benefit of relative of the individual.

Illustration

On 1-4-2023, Mr. Raja (a salaried employee) purchased a building from Mr. Kumar for Rs. 25,20,000. The value of the building adopted by the Stamp Valuation Authority for charging stamp duty was Rs. 28,00,000. Advice Mr. Raja regarding the tax treatment in this case.

If an individual purchases a capital asset, being an immovable property, and the stamp duty value of such property exceeds actual consideration by higher of Rs. 50,000 and 10% of the actual consideration, then the excess of stamp duty value over the purchase price will be charged to tax in the hands of the purchaser.

In the instant case, building is a capital asset for Mr. Kumar. The stamp duty value of the building exceeds the actual consideration by Rs. 2,80,000 which is higher than Rs. 50,000 and 10% of the actual consideration of Rs. 25,20,000, i.e., Rs. 2,52,000. Hence, the above discussed provision shall apply and the differential amount of Rs. 2,80,000 (Rs. 28,00,000 less Rs. 25,20,000) will be treated as income of Mr. Kumar.

Illustration

On 1-4-2023, Mr. Kumar (a salaried employee) purchased a building from Mr. Vipul for Rs. 25,40,000. The value of the building adopted by the Stamp Valuation Authority for charging stamp duty was Rs. 25,50,000. Advice Mr. Kumar regarding the tax treatment in this case.

If an individual purchases a capital asset, being an immovable property, and the stamp duty value of such property exceeds actual consideration by higher of Rs. 50,000 and 10% of the actual consideration, then the excess of stamp duty value over the purchase price will be charged to tax in the hands of the purchaser.

In the instant case, building is a capital asset for Mr. Kumar. Though the stamp duty value of the building exceeds the actual consideration by Rs. 10,000 but it does not exceed Rs. 50,000 and 10% of the actual consideration of Rs. 25,40,000, i.e., Rs. 2,54,000. Hence, the above discussed provision shall not apply and the differential amount of Rs. 10,000 (Rs. 25,50,000 less Rs. 25,40,000) will not be treated as income of Mr. Kumar.

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

If the following conditions are satisfied then value of prescribed movable property (meaning discussed in later part) received by an individual or HUF will be charged to tax:

1) Prescribed movable property is received without consideration (i.e., received as gift).

2) The aggregate fair market value of such property received by the taxpayer during the year exceeds Rs. 50,000.

In above case, the fair market value of the prescribed movable property will be treated as income of the receiver.

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 and includes Virtual Digital Asset (VDA).

Considering the above definition, nothing will be charged to tax in respect of gift of any item being a movable property other than covered in the above definition, e.g., Nothing will be charged to tax in respect of a television set received as gift, because a television set is not covered in the definition of prescribed movable property.

16. When prescribed movable property received without consideration, i.e., received as gift by an individual or HUF is not charged to tax

In following cases, nothing will be charged to tax in respect of prescribed movable property received without consideration:

1) Movable Property received from relatives.

Relative for this purpose means:

i. In case of an Individual

a. Spouse of the individual;

b. Brother or sister of the individual;

c. Brother or sister of the spouse of the individual;

d. Brother or sister of either of the parents of the individual;

e. Any lineal ascendant or descendent of the individual;

f. Any lineal ascendant or descendent of the spouse of the individual;

g. Spouse of the persons referred to in (b) to (f).

ii. In case of HUF, any member thereof.

2) Movable Property received on the occasion of the marriage of the individual.

3) Movable Property received under will/ by way of inheritance.

4) Movable Property received in contemplation of death of the donor.

5) Movable Property received from a local authority [as defined in Explanation to section 10(20) of the Income-tax Act].

6) Movable Property received from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in section 10(23C). [w.e.f. AY 2023-24, this exemption is not available if property is received by a specified person referred to in section 13(3)].

7) Movable Property received from or by a trust or institution registered under section 12A, 12AA or section 12AB. [w.e.f. AY 2023-24, this exemption is not available if property is received by a specified person referred to in section 13(3)].

8) Property received by any fund/trust/university/other educational institutions /hospital/other medical institution referred to in section 10(23C)(iv)/(v)/(vi)/(via) (applicable if property is received on or after 1^st April 2017)

9) Property received by way of transaction not regarded as transfer under clause (viiac)/(viiad)/(viiae)/(viiaf) of section 47.

10) Property received from an individual by a trust created or established solely for the benefit of relative of the individual.

Illustration

During the financial year 2023-24, Mr. Raja received following gifts from his friends/relatives:

> Shares received from his father, the fair market value(i.e. value as per stock exchange) of the shares on the date of gift was Rs. 2,84,000.

> Jewellery received from his friend, the fair market value of the jewellery is Rs. 84,000.

> Jewellery received from his friends and relatives on the occasion of his marriage, the fair market value of jewellery is Rs. 2,52,000.

> Advice Mr. Raja regarding the tax treatment of above gifts.

If the following conditions are satisfied then value of prescribed movable property (meaning has been discussed earlier) received by an individual or HUF will be charged to tax:

1. Prescribed movable property is received without consideration (i.e., received as gift).

2. The aggregate fair market value of such property received by the taxpayer during the year exceeds Rs. 50,000.

In above case, the fair market value of the prescribed movable property will be treated as income of the receiver.

The discussed provisions are not applicable in case of prescribed movable property received from relatives and received on certain specified occasions.

Considering above provisions, the tax treatment of various items received by Mr. Raja will be as follows:

1) Nothing will be charged to tax in respect of shares received from his father, since father comes under the definition of the term ‘relative’.

2) Friend is not covered in the definition of relative and hence, in respect of jewellery received from his friend, the fair market value, i.e., Rs. 84,000 will be charged to tax in the hands of Mr. Raja.

3) Marriage is covered in the list of specified occasions, and hence, nothing will be charged to tax in respect of jewellery received from his friends and relatives on the occasion of his marriage.

Illustration

An individual received gift of jewellery from his friends. The total value of jewellery received during the year as gift from all the friends amounted to Rs. 84,000. What will be the tax treatment of gift in this case?

If the aggregate fair market value of prescribed movable property received by an individual or HUF without consideration during the year exceeds Rs. 50,000, then the total value of such properties received during the year without consideration will be charged to tax. In this case the total value of jewellery received during the year exceeds Rs. 50,000 and hence, Rs. 84,000 will be charged to tax.

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

If the following conditions are satisfied then prescribed movable property (meaning has been discussed earlier) received by an individual or HUF will be charged to tax:

1) Prescribed movable property is acquired by an individual or HUF.

2) 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.

Considering the definition of prescribed movable property (as discussed earlier), nothing will be charged to tax in respect of gift of any item, being a movable property other than covered in the above definition. e.g., Nothing will be charged to tax in respect of a television set received as gift because a television set is not covered in the definition of prescribed movable property.

18. When prescribed movable property received for less than its fair market value by an individual or HUF is not charged to tax

In following cases, nothing will be charged to tax in respect of prescribed movable property received for less than its fair market value:

1) Movable Property received from relatives.

Relative for this purpose means:

i. In case of an Individual

a. Spouse of the individual;

b. Brother or sister of the individual;

c. Brother or sister of the spouse of the individual;

d. Brother or sister of either of the parents of the individual;

e. Any lineal ascendant or descendent of the individual;

f. Any lineal ascendant or descendent of the spouse of the individual;

g. Spouse of the persons referred to in (b) to (f).

ii. In case of HUF, any member thereof.

2) Movable Property received on the occasion of the marriage of the individual.

3) Movable Property received under will/ by way of inheritance.

4) Movable Property received in contemplation of death of the donor.

5) Movable Property received from a local authority [as defined in Explanation to section 10(20) of the Income-tax Act].

6) Movable Property received from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in section 10(23C) [w.e.f. AY 2023-24, this exemption is not available if property is received by a specified person referred to in section 13(3)].

7) Movable Property received from or by a trust or institution registered under section 12A, 12AA or section 12AB. [w.e.f. AY 2023-24, this exemption is not available if property is received by a specified person referred to in section 13(3)].

8) Property received by any fund/trust/university/other educational institutions/hospital/other medical institution referred to in section 10(23C)(iv)/(v)/(vi)/(via) (applicable if property is received on or after 1^st April 2017)

9) Property received by way of transaction not regarded as transfer under clause (viiac)/(viiad)/(viiae)/(viiaf) of section 47.

10) Property received from an individual by a trust created or established solely for the benefit of relative of the individual.

Illustration

During the financial year 2023-24 Mr. Raja purchased the following capital assets:

1) Gold jewellery purchased for Rs. 1,84,000, the fair market value of gold jewellery is Rs. 2,84,000.

2) Bullion purchased for Rs. 5,50,000, the fair market value of the bullion is Rs. 6,00,000.

3) Motor car purchased for Rs. 1,52,000, the fair market value of car is Rs. 2,52,000. Advice him regarding the tax treatment of above items acquired by him.

Any prescribed movable property (meaning has been discussed earlier) acquired for less than its fair market value by an individual/HUF is charged to tax if the following conditions are satisfied:

1) Prescribed movable property is acquired by an individual or HUF.

2) 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.

The above discussed provisions are not applicable in case of prescribed movable property received from relatives and received on certain specified occasions.

Considering above provisions, the tax treatment of various items acquired by Mr. Raja will be as follows:

> Gold jewellery and bullion are covered in the definition of specified movable property. The fair market value of gold jewellery is Rs. 2,84,000 and of bullion is Rs.6,00,000. The purchase price of gold jewellery is Rs.1,84,000 and that of bullion is Rs. 5,50,000. It can be observed that both the properties are acquired for less than its fair market value.

The excess of fair market value over the purchase price will amount to Rs. 1,50,000 (Rs. 1,00,000 for gold jewellery and Rs. 50,000 for bullion) which is more than Rs. 50,000. Hence, the entire excess of fair market value over purchase price i.e. Rs. 1,50,000 will be charged to tax in the hands of Mr. Raja. It will be charged to tax under the head “Income from other sources”.

> Motor car does not come under the definition of prescribed movable property, hence, nothing will be taxed in respect of purchase of motor car.

Illustration

On 1-4-2023, Mr. Kumar purchased shares from Mr. Raja for Rs. 84,000. The fair market value of the shares i.e. value as per price quoted in stock exchange is Rs. 1,00,000. Further, on 1-7-2023, he acquired gold jewellery from Mr. Rajkumar for Rs. 25,200. The fair market value of jewellery is Rs. 50,400. Mr. Kumar is confused regarding the tax consequences arising in respect of above items purchased by him. Advise him in this regard.

Any prescribed movable property (meaning has been discussed earlier) acquired for less than its fair market value by an individual/a HUF is charged to tax if the following conditions are satisfied:

1) Prescribed movable property is acquired by an individual or HUF.

2) 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.

The above provisions are not applicable in case of prescribed movable property received from relatives and received on certain specified occasions.

Considering the above discussed provisions, the tax treatment of various items acquired by Mr. Kumar will be as follows:

> The fair market value of the share is Rs. 1,00,000 and shares are acquired for Rs. 84,000, thus, the excess of fair market value over purchase price will come to Rs.16,000.

> The fair market value of jewellery is Rs. 50,400 and it is acquired for Rs. 25,200, thus, the excess of fair market value over purchase price will come to Rs. 25,200.

The total of the excess of fair market value over purchase price amounts to Rs. 41,200 (Rs. 16,000 for shares + Rs. 25,200 for jewellery) which is below Rs. 50,000 and hence, nothing will be charged to tax in the hands of Mr. Kumar.

Suppose, if in the given case, the fair market value of shares is Rs. 1,84,000 instead of Rs. 1,00,000, then the aggregate of excess of fair market value of shares and gold jewellery will amount to Rs. 1,25,200, (Rs. 1,00,000 excess fair market value of shares + Rs. 25,200 excess fair market value of gold jewellery). The excess of fair market value over purchase price exceeds Rs. 50,000 and hence, entire excess of Rs. 1,25,200 will be charged to tax as income from other sources.

19. Tax relief to COVID-19 patients and their family

The Finance Act, 2022 has brought amendments to the Income-tax Act to give tax relief to taxpayers receiving financial help from their employers and well-wishers for meeting the expenses incurred on treatment of Covid-19

20. Sum of money or property received for Covid-19 treatment from any other person

Any sum of money or any property received by an individual, from any person, in respect of any expenditure actually incurred by him on his medical treatment or treatment of any member of his family in respect of any illness related to COVID-19, shall not be charged to tax if he furnished a Statement in Form No. 1 providing the details of amount received during the year.

The statement shall be filed within 9 months from the end of financial year in which the amount is received or 31.12.2022, whichever is later. Further, he shall be required to keep a record of following documents:

(a) The COVID-19 positive report or medical report if clinically determined to be COVID-19 positive through investigation in a hospital or an in-patient-facility by a treating physician of a person so admitted; and

(b) All necessary documents of medical diagnosis or treatment for COVID-19 or illness related to COVID-19 suffered within 6 months from the date of being determined as COVID-19 positive.

21. Sum of money or property received by family member of a person who died due to Covid-19

Any sum of money or any property received by family member of a person who died due to Covid-19, the money or property so received shall not be charged to tax in hands of the family member where such money or property is received from the employer of deceased person.

Where the money or property is received from any other person or persons, the exemption amount shall be limited to Rs. 10 lakh in aggregate. Thus, where the aggregate amount of sum received from other persons during the previous year exceeds Rs. 10 lakh, then the excess amount shall be taxable in the hands of a family member of deceased.

Note: The member must receive the payment within 12 months from the date of death of such person and satisfy the following conditions:

(a) the death of the individual should be within 6 months from the date of testing positive or from the date of being clinically determined as a COVID-19 case;

(b) the family member of such individual shall keep a record of the COVID-19 positive report or medical report if clinically determined to be COVID-19 positive through investigation in a hospital or in an in-patient-facility by a treating physician of a person so admitted;

(c) the family member of such individual shall keep a record of a medical report or death certificate issued by a medical practitioner or a Government civil registration office, in which it is stated that the death of the person is related to COVID-19.

(d) the family member furnished a Statement in Form A providing the details of amount received during the year. The statement shall be filed within 9 months from the end of financial year in which the amount is received or 31.12.2022, whichever is later.

22. Meaning of Family  

The meaning of family, in relation to an individual, means the spouse and children of the individual and the parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual.

23. Important Points on Tax Treatment Of Gifts Received By An Individual Or HUF

1. If the following conditions are satisfied then any sum of money received without consideration (i.e., monetary gift may be received in cash, cheque, draft, etc.) by an individual/ HUF will be charged to tax:

• Sum of money received without consideration.
• The aggregate value of such sum of money received during the year exceeds Rs. 50,000.

2. Sum of money received from relatives will not be charged to tax in the hands of an individual or HUF. As per the definition of the relative, brother or sister of the spouse of an individual will be treated as relative of an individual. Hence, sum of money received from brother or sister of the spouse of the individual will not be charged to tax in the hands of the individual.

3. As per the definition of relatives, members of HUF will be treated as relatives of the HUF and money received from relatives will not be charged to tax. Hence, money received by a HUF from its members will not be charged to tax in the hands of HUF.

4. 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 charged to tax (i.e. the total amount of gift and not the amount in excess of Rs. 50,000).

5. If the following conditions are satisfied then immovable property received without consideration by an individual or HUF will be charged to tax:

1) Immovable property, being land or building or both, is received by an
individual/HUF.

2) 3) The immovable property is a ‘capital asset’ within the meaning of section 2(14) for such an individual or HUF.

4) The stamp duty value of such immovable property received without consideration exceeds Rs. 50,000.

6. Gift received on the occasion of marriage of the individual is not charged to tax.

7. If an immovable property acquired by an individual for a consideration which is less than the stamp duty value and the difference exceeds Rs. 50,000, and 10% of the actual consideration then the excess of stamp duty value over the purchase price of the property will be treated as income of the purchaser and not of the seller.

8. Motor car is not covered in the definition of prescribed movable property. Hence, nothing will be charged to tax in case of gift of motor car received by an individual from his friends even though the fair market value exceeds Rs. 50,000.

9. If the aggregate fair market value of prescribed movable property received by the taxpayer during the year exceeds Rs. 50,000, than entire fair market value will be charged to tax.

10. Gift of movable property received from a local authority [as defined in Explanation to section 10(20) of the Income-tax Act] will never be charged to tax in the hands of an individual or a HUF.