Isha Ambani, the daughter of Indian business magnate Mukesh Ambani, was married this December to Anand Piramal. While everyone showered the couple with love, blessings and gifts, the new house Gulita that Isha Ambani is moving into, is a gift from Piramal’s parents. The Piramals, who have interests in real estate and pharma, bought the property, previously owned by Hindustan Unilever, at a reported price of $62 million in 2012.

In India, we express our love and affection through gifts. We often hear of cars, Jewellery being gifted and homes being given to family members. But do these gifts turn taxable after a limit? Do your elders need to pay gift tax before presenting them?

GIFT TAX: The tax levied on the gifts that you have received in money or its worth and which is over and above a certain set limit by the Indian law is known as gift tax. Income tax on gifts helps regulate the gives which is given to you by a person who is not a close relative as per the definition of Income Tax Law of India. These gifts include tangible, intangible, movable and immovable assets which can be given voluntarily and without considering it in money or it’s worth. There are, however, some gifts which are exempt from taxes.

TAXATION OF GIFTS: SECTION 56(2) OF THE INCOME TAX ACT, 1961

Category I Sum of money (gift in cash/cheque/draft) without consideration Aggregate money received exceeding Rs. 50,000/- Whole aggregate money is taxable
Category II Immovable property without consideration Immovable property received and SDV exceeds Rs. 50,000 Stamp duty value is taxable
Category III Immovable property with consideration A.Y. 2018-19

SDV > consideration & (SDV- Consideration) >50,000

A.Y. 2019-20

SDV >105% of consideration & (SDV-Consideration) >50,000

(SDV- Consideration) is taxable
Category IV Movable property without consideration Aggregate FMV of movable property exceeds Rs. 50,000 Whole aggregate FMV is taxable
Category V Movable property with consideration Aggregate

(FMV- consideration) > 50,000

(Aggregate FMV – Consideration) is taxable

EXEMPTED GIFTS:

1. Any sum of money received (as gift) without consideration up to Rs. 50000/- in one year is not taxable.

2. Following receipts without consideration are exempt

a) Gifts received from ant relative

b) Gifts received on occasion of marriage of an individual

c) Gifts received under a will or by way of inheritance

d) Gifts received in contemplation of death of payer

e) Gifts received from local authority as defined in explanation to section 10(20)

f) Gifts received from educational or medical institution or fund etc. referred to u/s 10(23C)

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

h) Gift received by way of transactions not regarded as transfer under section 47(i)/ (iv)/(v)/(vi)/ (via)/ (viaa)/(vib)/(vic)/(vicb)/(vid)/(vii)

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

DEFINITIONS:

1. Relatives: As per the Income tax act, the sum of money received from any of your relatives are fully exempt from tax. Here the “relatives” term defines by the Income Tax act as follows :

  • 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 descendant of the individual
  • Any lineal ascendant or descendant of the spouse of the individual
  • Spouse of the person referred to in clauses (ii) to (vi).
  • In case of a Hindu undivided family, any member thereof;

2. Immovable property

  • being land or building or both
  • Shares and securities,
  • Jewelry,
  • Archaeological collection,
  • Drawings,
  • Paintings,
  • Sculptures,
  • any work of art or

3. 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/-.

4. 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.

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Company: Pallavi Mehta and Associates
Location: Udaipur, Rajasthan, IN
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6 Comments

  1. vswami says:

    To ADD(:
    In the Explanation (d)(I), under clause (vii) of sec 56 (2) , “property” has been explained to mean- SAME WAY AS IN SEVERAL OTHER RELATED CONTEXTS- “immovable property being land or building or both”.
    For independent thoughts viewpoints shared , – as to why, if were to be strictly construed, that cannot be taken to encompass within its purview, UNITS (Flats/Apartments in a building), suggest to go through the ARTICLES published/displayed , and available in public domain , if were diligently searched for.

  2. vswami says:

    IMPROMPTU
    A Random Pick (:
    “3. 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/-.”
    Obvious reference is to sec 56, clause (v) , later substituted by clause (vi), w.e.f. 1-4-2007, once again substituted by clause(vii) w.e.f.. 1010-2009 .
    Promised so, the following calls for a special noting:

    1. The referred provision seeks/purports to tax , receipts/ transfers, in the hands of the recipient/transferee, any sum of money or any immovable property, “WITHOUT CONSIDERATION”.

    2. It is provided , however, that there shall be no taxation, in cases / circumstances specifically excluded.

    3. These provisions have come to be effected / brought into being, in the aftermath of the abolition of ‘gift tax’.
    To be noted: Such gift tax was payable by the person gifting/ transferring; not by the recipient- beneficiary of the gift/transfer;
    Whereas under the above referred later effected provisions of sec 56, it is the recipient / transferee who has been made liable to pay income-tax.
    In one’s perspective, there appears to be a glaring / obnoxious anomaly/inconsistency in the legislative amendments so made, as briefly set out below (:
    I. A) : The terms, -‘capital asset’ and “transfer, in relation to a capital asset “, have been specially defined in sec, 2 (14) and sec. 2(47), respectively.

    B).Consequent upon the above referred amendment (s) of sec 56, the term “income” ,as specifically defined, in sec 2 (24) , has been correspondingly amended.

    II. Even after the foregoing amendments, as per sec 47,, as specified in clause (ii), , “any transfer of a capital asset under a gift “‘ is not to be regarded as “transfer”.

    III. Sec 56(2) , as read and understood, does not seem to have a non-obstante clause , prefixed, so as to have an overriding effect on sec 47; in particular, in so far as a gift is excludible / continues to be excluded as not a ‘transfer”. Albeit, nw, it is the “transferee”, not the transferor, who is made to pay tax.
    In the light of the above stated viewpoints, – open to correction should those be found to be not-well- founded in any respect- it might, in any case, be worthwhile to have an intelligent insight, and to form an eminent and incisive opinion, also care and share, for the common good of one and all concerned, not barring the “Executive”.
    MASTER Note: This Feed- Input volunteered in good spirit and gratuitously supplied, – out of sheer compassion for co-members of the CA fraternity; and more importantly, wholly in societal interests, – is solely meant only to reach to those professionals, – CAs or lawyers, in active practice, and their clientele, the paymasters; provided , of course, they care to and remain tuned to the same intended wave length, without any distortion whatsoever..

    courtesy

  3. MALLIGARJUNAN says:

    A grandfather pays Rs.1.00 lakh towards annual insurance premium to his grand daughter.
    Will the maturity amount attracts tax
    If so, who is to pay the tax.

  4. B Ramnarayan says:

    What about gifts from employer to employee? Recently, I received gifts for about Rs.30,000 from my employer and Income tax was deducted on this value from my salary. Is this correct? Had I known that I would need to pay 31% IT, I would as well have not accepted the gifts !! Kindly clarify.

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