Taxability of Gift Received By A Person

Any person receives Gift from any other person, would be consider as income of the recipient as per section 56(2)(x) with certain exemptions. Section 56(2)(x) was inserted by Finance Act 2017 w.e.f.1^st April, 2017 read as under:

Where any person receives, in any previous year, from any person or persons on or after 1^st day of April 2017.-

(a) any some of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such some;

(b) any immovable property…..

(A) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;

(B) for a consideration, the stamp duty value of such property as exceeds such consideration, if the amount of such excess is more than the higher of the following amounts, namely:—

(i) the amount of fifty thousand rupees; and

(ii) the amount equal to five per cent of the consideration:

[w.e.f. 01.04.2021]

Illustration: An individual received gift of three properties from his friend. The value of none of the property exceeded Rs. 50,000, but the aggregate value of these three properties exceeded Rs. 50,000. What will be the tax treatment of gift in this case?

Answer: In case of immovable property received without consideration by an individual or HUF, the limit of Rs. 50,000 is to be applied transaction-wise and all immovable properties received as gift during the year are not to be clubbed for applying the limit of Rs. 50,000. Hence, if the total stamp value of immovable properties received as gift during the year exceeds Rs. 50,000 but the stamp value of none of the property exceeds Rs. 50,000, then nothing will be charged to tax.

Illustration: Would any taxability arise if an immovable property is received for less than its stamp duty value?

Answer: On or after 01-04-2020 if immovable property is received for a consideration and if stamp duty value exceeds 105% of the amount of consideration and the difference between stamp duty value and consideration is more than Rs. 50,000, then such difference is chargeable to tax.

(c) any property, other than immovable property.-

(A) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property;

(B) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration

Provided that this clause shall not apply to any sum of money or any property received –

(I) From any relative : Gift received from Relatives is fully exempted from the levy of tax and no income tax would be levied on such Gifts. To remove any confusion regarding the classification of Relatives, the Income Tax Act has very clearly laid down that in case of individuals, only the following will be treated as relative for the purpose of claiming exemption:

• • • • Spouse of the Individual
      • Brother or Sister of the Individual
      • Brother or Sister of spouse of the Individual
      • Brother or Sister of either of the parents of the Individual
      • Any Linear ascendant or descendent of the Individual
      • Any Linear ascendant or descendent of the spouse of the Individual
      • Spouse of the person mentioned above

In case of HUF, all members would be considered its relative.

There is no upper limit on the value of gifts received to be exempted. All gifts received from relatives ( irrespective of value) are exempted.

If the aggregate value of gifts received is less than Rs. 50,000 (whether cash or in kind) :

If the aggregate value of gifts (whether cash or in kind) received from a person or persons( other than relative) in any financial year does not exceed Rs. 50,000/ then such gifts are not liable for tax. However, if the value of gifts received exceeds Rs. 50,000/ then the entire gift so received is taxable as Income from other sources u/s 56(2)(X)

Illustration: Mr. A receives gift from Mr. B worth Rs. 25,000 and from Mr. C worth Rs. 20,000 during the year 1^st April, 2019 to 31^st March 2020. In this case, no income would be added as aggregate value of gifts received is less than Rs. 50,000

However in case the value of gifts received by Mr. A from Mr. B was Rs. 45,000 and from Mr. C worth Rs. 45,000, income tax on such gifts would be liable to be paid by Mr. A as the aggregate value exceeds Rs.50,000 In such a case Rs. 90,000 is to be added to the income of Mr. A

(II) On the occasion of Marriage of the Individual:

Gift received by an Individual on his own marriage are fully exempted from levy of income tax. It has also been clarified that gifts received by a person on his own marriage are exempted and not on the marriage of their son, daughter, brother or sister.

(III) Gifts received under a WILL or by way of Inheritance or contemplation of death of the payer:

Any amount received under a WILL or by way of inheritance or in contemplation of death of the payer is fully exempt in the hands of the person receiving the gift. There is no upper limit in this case and the whole gift received is considered as tax free.

(IV) Gifts received from any Local Authority as defined under section 10(20) of the Income Tax Act 1961.

(V) Gifts received from any fund or foundation or university or other education institution referred to in Section 10(23C) of the Income Tax Act 1961.

(VI) Gifts received from any trust or institution registered under section 12AA or Section 12AB (after 1^st October, 2020) of the Income Tax Act 1961.

(VII) In case the property is received without any consideration being paid by the person receiving the gift, the stamp duty value/fair market value of the property would be taxable ( provided the stamp duty value exceeds Rs.50,000)

In case of Immovable Properties the Stamp Duty value would be considered and in case of Movable Properties Fair Market Value would be considered.

The meaning of Property has been defined and Property means:

• Immovable Property being lad or building or both
• Shares and Securities
• Jewellary
• Archaeological Collections
• Drawings
• Paintings
• Sculptures
• Any other work of Art

Tax on Property received as Gift would only be levied in case of the above mentioned properties. Thus, in case any property is not listed above, tax on those properties received as gift would not be levied.

The properties are not considered as property mentioned above are Motor Cars, Laptops, Mobiles etc.

(Republished with Amendments)