Gifts are taxed in India under the Income Tax Act, as there is no separate gift tax in India since the abolishment of Gift Tax Act of 1958 in 1998. In India, gifts of up to Rs. 50,000 per year are tax-free. Furthermore, presents from certain relatives, such as parents, spouses, and siblings, and in particular occasions are tax-free.
What is a Gift?
As per Income Tax Act, Gift means property (both movable and immovable) and money (cash, cheque, draft, etc) received without consideration or against inadequate consideration. Immovable property includes Land or building or both (it does not include agricultural land in rural areas) and Movable property includes Shares, securities, jewelry, archaeological collection, drawing, painting, any work of art, bullion, vehicles, etc.
From the taxation point of view, gifts can be classified as:
- Monetary gift or money received in the form of cash, cheque, draft, bank transfer, etc.
- Movable property such as shares, bonds, jewelry, sculptures, paintings, etc.
- Immovable property like building, land, residential/commercial property.
Taxability of Gifts
Monetary Gifts – Any sum of money received (aggregate value of such sum of money received during the year exceeds Rs. 50,000.) and the sum of money is received without consideration by an individual/ HUF it will be charged to tax.
Once the aggregate value of gifts received during the year exceeds Rs. 50,000 then all gifts are charged to tax.
Movable Property without consideration – The Fair market value of such property is taxable in case, the Fair market value (FMV) of such property is more than Rs 50,000.
However, the taxable gift is Nil when Fair Market value of the property does not exceed Rs 50,000.
Movable Property with consideration – The amount is taxable in case the fair market value of the gifted property exceeds the purchase price by more than Rs. 50,000. The amount that is taxable is the difference between the fair market value and the purchase price of the property. For example: If the fair market value of shares given as a gift is Rs. 5 Lakh and the original purchase price is Rs. 3 Lakh, the taxable amount is Rs. 2 Lakh (Rs. 5 Lakh – 3 Lakh).
However, the taxable gift is Nil when Fair Market value of the property does not exceed the consideration by Rs 50,000.
Immovable Property without consideration – The Stamp Duty value of such property is taxable in case the Stamp Duty value of such property is more than Rs 50,000.
However, the taxable gift is Nil when Stamp Duty value of the property does not exceed Rs 50,000.
Immovable Property with consideration – The amount is taxable in case the Stamp duty value of the gifted property exceeds the purchase price by more than Rs. 50,000. The amount that is taxable is the difference between the stamp duty value and the purchase price of the property.
However, the taxable gift is Nil when Stamp Duty value of the property does not exceed the consideration by Rs 50,000.
Exemptions of Gifts
Cases in which sum of money or monetary gifts received by an individual or HUF is not charged to tax
| In case of Individual | In case of HUF |
| Any sum of Money received from relatives* | Any sum of Money received from relatives* of all the members. |
| Money received on the occasion of the marriage of the individual. | Money received on the occasion of the marriage of the individual. |
| Money received under will/ by way of inheritance. | Money received under will/ by way of inheritance. |
| Money received in contemplation of death of the payer or donor. | Money received in contemplation of death of the payer or donor. |
| Money received from a local authority | Money received from a local authority |
| 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). | 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). |
| Money received from or by a trust or institution registered under section 12A, 12AA or section 12AB | Money received from or by a trust or institution registered under section 12A, 12AA or section 12AB |
| Money received by any fund or trust or institution any university or other educational institution or any hospital or other medical institution | Money received by any fund or trust or institution any university or other educational institution or any hospital or other medical institution |
| Money received as a consequence of demerger or amalgamation of a company or business reorganization of a co-operative bank under section 47. | Money received as a consequence of demerger or amalgamation of a company or business reorganization of a co-operative bank under section 47. |
*Relative includes –
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).
Onus of Tax payments
As per Income Tax provisions and rules therein, gifts are taxed as direct tax (income tax). The donee, i.e. the receiver of the gift (monetary, movable or immovable), is responsible for declaring and making the appropriate tax payments.
Author Bio
