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’.

It is important to note that such gifts received could have tax implications in the hands of the recipient; therefore, one needs to exercise caution so that he is not caught unawares.

Sum of money:-As per the provisions of the I-T Act, 1961 (the Act), any sum of money received by an individual or a Hindu undivided family in a particular financial year, without consideration, the aggregate value of which exceeds Rs 50,000 is taxable.

Immovable Property:Effective October 1, 2009, the scope of the taxability provisions in respect of the gifts has been enlarged to include immovable property, including land or building or both. If any immovable property is received without consideration, whose stamp duty value exceeds Rs 50,000, the stamp duty value of such property would be taxable.

If any immovable property is received for a consideration which is less than the stamp duty value of the property by an amount exceeding Rs 50,000, the stamp duty value of such property would be taxable.

Other gifts:-
Similar to the immovable property, certain other gifts received w.e.f October 1, 2009, has also been brought under the tax net. These include shares and securities, jewellery, archeological collections, drawings, paintings and sculptures as specified under the Act. In these cases, if the aggregate fair market value of the benefit received by way of a gift exceeds Rs 50,000, the same would be taxable.

present-gift-ribbon-bow-yellow-gold-silverExceptions to the rule :- It is pertinent to note that the tax law does provide for certain exceptions which are worth noting as these provide substantial relief to individuals/HUF under normal day-to-day circumstances. These include:

Gifts from relatives :
-Gifts received from any relative, as defined under the Act, is not taxable. Relatives include 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; and the spouse of the person referred to as aforesaid.


Gifts received on marriage:-
Any gift received by an individual on the occasion of his/her marriage would also not be taxable. It is customary to receive gifts of money and kind on the occasion of marriage. Therefore, this is an important exception to the general rule.


Gift received under a will, etc :-
Any gift received under a will or by way of inheritance, or in contemplation of death of the payer is also not taxable.

Certain other events :-In case an individual receives any gift from any local authority as specified under the Act, the same would not be taxable. Similarly, any gift received from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust/institution, as specified under the Act, would not be taxable.

Documentary Evidence:-
Gifts received are quite prone to litigation. Hence, it is prudent to maintain documentary evidence in respect of the gifts received, to avoid any dispute with tax authorities at a later stage. This is particularly relevant in case the gift amount is substantial and also where it is received from relatives. In case of gift of money received from a relative, it is advisable to have gift deed/letter of understanding exchanged and kept in records by the recipient of the gift for future reference.

FAQs on Gifts received by an individual or HUF

Q.1 Are monetary gifts received by an individual or Hindu Undivided Family (HUF) taxable?

Ans: If the following conditions are satisfied then any sum of money received (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.

(*) Refer next FAQ for situations in which sum of money received by an individual or HUF is not charged to tax, i.e., monetary gift is not charged to tax. ​

Q.2 Are there any cases in which sum of money received without consideration, i.e., monetary gift received by an individual or HUF is not charged to tax?

​​​​​Ans: If the conditions given in preceding FAQ are satisfied then sum of money received without consideration (i.e., monetary gift) by an individual or HUF will be charged to tax. However, in the following cases monetary gift will not be 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).

7) Money received from a trust or institution registered under section 12AA.

8) Share received as a consequences of demerger or amalgamation of a company under clause (vid) or clause (vii) of section 47, respectively.

9) Share received as a consequences of business reorganization of a co-operative bank under section 47(vicb).

Q.3 Gift received from relatives are exempt from tax. Who will be considered as relative for the purpose of claiming such exemption?

Ans: Following persons would be considered as relative ​

(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).​

Q.4 Apart from marriage are there any other occasions in which monetary gift received by an individual will not be charged to tax?

Ans: Gift received only on the occasion of marriage of the individual is not charged to tax. Apart from marriage there is no other occasion in which gift received by an individual is not charged to tax. Hence, gift received on occasions like birthday, anniversary, etc. will be charged to tax.​​

Q.5 Are monetary gifts received from friends liable to tax?

Ans: Gifts received from relatives are not charged to tax.

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

Friend is not a relative as defined in the list and hence, gift received from friends will be charged to tax (if other criteria of taxing gift are satisfied).​

Q.6 Are monetary gifts received from abroad liable to tax?

Ans: 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 prescribed in the preceding FAQ, then gifts whether received from India or abroad will be charged to tax.​​

Q.7 An Individual received different gifts (cash) from his friends, none of the gift exceeded Rs. 50,000 but the total of the gifts received during the year exceeded Rs. 50,000. What will be the tax treatment in such a case?

Ans: 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 aggregate value of such gifts received during the year will be charged to tax.​

Illustration

Mr. Kumar received following gifts during the financial year 2014-15:

  • 1,84,000 from his friend residing in Canada.
  • 25,200 from his elder brother residing in Delhi.
  • 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:

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

Illustration

During the financial year 2015-16, Mr. Raja received following gifts from his friends:

  • 25,000 on 1-5-2014 (being his birthday)
  • 18,000 on 20-12-2014

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.

Q.8 ​If the aggregate value of gift received during the year by an individual or HUF exceeds Rs. 50,000, whether total amount of gift will be charged to tax or only the amount in excess of Rs. 50,000 will be charged to tax?

Ans: Sum of money received without consideration by an individual or HUF is charged to tax if the aggregate value of such sum received during the year exceeds Rs. 50,000. Once the aggregate value of monetary gift received during the year exceeds Rs. 50,000, then the aggregate value of gift received during the year will be charged to tax.​

​Q.9 Are gifts of immovable property received by an individual or HUF charged to tax?

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

  • Immovable property, being land or building or both, is received by an individual/HUF.
  • The immovable property is received without consideration (i.e., received as a gift) or for a consideration which is less than the stamp duty value of the property by an amount exceeding Rs.50,000.
  • The immovable property is a ‘capital asset‘ within the meaning of section 2(14)​​ for such as individual or HUF.
  • The stamp duty value of such immovable property received without consideration exceeds Rs. 50,000.

(*) Refer next FAQ for situations in which immovable property received without consideration (i.e., received as a gift) by an individual or HUF is not charged to tax.​

Q.10 ​Are there any cases in which the value of immovable property received by an individual or HUF without consideration (i.e. by way of gift) is not charged to tax?

​Ans: If the conditions given in preceding FAQ are satisfied, then immovable property received by an individual or HUF without consideration (i.e., by way of gift) will be charged to tax. However, in the following cases gift of immovable property will not be charged to tax.

  1. Property received from relatives.
  2. Property received by a HUF from its members.
  3. Property received on the occasion of the marriage of the individual.
  4. Property received under will/ by way of inheritance.
  5. Property received in contemplation of death of the donor.
  6. Property received from a local authority as defined under section 10(20) of the Income-tax Act.
  7. 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).
  8. Property received from a trust or institution registered under section 12AA​.

Q.11 ​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?

Ans: 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.

​Q.12 Are immovable properties received as gift from friends liable to tax?

Ans: Gifts received from relatives are not charged to tax. Relative for this purpose means:

(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).

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).​

Q.13 ​Are gifts of immovable property located abroad liable to tax?

Ans: 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 prescribed in the preceding FAQ, then gifts whether received from India or abroad will be charged to tax.​

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 1-5-2015, 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”.

Q.14 ​An Individual received gift of a 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?

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

​Q.15 Would any taxability arise if an immovable property is received for less than its stamp duty value?

​​Ans: Apart from taxing immovable property received without consideration, i.e., received as gift, the Income-tax Law has also designed the 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 (*):

  • Any immovable property is acquired by an individual or a HUF.
  • The immovable property is a ‘capital asset’ within the meaning of section 2(14)​of the Act for such individual or HUF.
  • Such property is acquired for a consideration but the consideration is less than the stamp duty value and the difference exceeds Rs. 50,000.

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

​Q.16 Are there any cases in which immovable property received by an individual or HUF for less than its stamp duty value is not charged to tax?​

​​Ans: If the conditions given in preceding FAQ are satisfied, then immovable property received (i.e. acquired) by an individual or HUF for less than its stamp duty value is charged to tax. However, in the following cases nothing will be charged to tax in respect of immovable property received for less than its stamp duty value :​​

  1. Property received from relatives.
  2. Property received by a HUF from its members.
  3. Property received on the occasion of the marriage of the individual.
  4. Property received under will/ by way of inheritance.
  5. Property received in contemplation of death of the donor.
  6. Property received from a local authority as defined under section 10(20) of the Income-tax Act).
  7. 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).
  8. Property received from a trust or institution registered under section 12AA​​.

Illustration

On 1-4-2015, Mr. Raja (a salaried employee) purchased a building from Mr. Kumar for Rs. 2 5,20,000. The value of the building adopted by the Stamp Valuation Authority for charging stamp duty was Rs. 26,00,000. Advice Mr. Raja regarding the tax treatment in this case.

**

If a taxpayer purchases any immovable property (which is capital asset for him) for less than its stamp duty value and the difference between the stamp duty value and the actual purchase price exceeds Rs. 50,000, then excess of stamp duty value over the purchase price will be charged to tax in the hands of the purchaser. It will be charged to tax under the head “Income from other sources”.

In the given case, property is a capital asset for Mr. Raja. The stamp duty value adopted by the Stamp Valuation Authority for charging stamp duty is Rs. 26,00,000 and the property is purchased for Rs. 25,20,000 i.e. for less than the stamp duty value, hence, the above discussed provision will apply and the difference of Rs. 80,000 (Rs. 26,00,000 less Rs. 25,20,000) will be treated as income of Mr. Raja.

Illustration

On 1-4-2015, Mr. Kumar (a salaried employee) purchased a building from Mr. Vipul for Rs. 2 5,40,000. 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 a taxpayer purchases any immovable property (which is capital asset for him) for less than its stamp duty value and the difference between the stamp duty value and the actual purchase price exceeds Rs. 50,000, then excess of stamp duty value over the purchase price will be charged to tax in the hands of the purchaser. It will be charged to tax under the head “Income from other sources”.

In the given case, the property is a capital asset for Mr. Kumar. The stamp duty value adopted by the Stamp Valuation Authority for charging stamp duty is Rs. 25,50,000 and the property is purchased for Rs. 25,40,000. The property is purchased for less than the stamp duty value, but the difference is of Rs. 10,000 only i.e. less than Rs. 50,000 and hence, the above discussed provision will not apply. In other words, nothing will be charged to tax in the hands of Mr. Kumar in respect of purchase of the property for less than the stamp duty value.

Q.17 ​Are gifts of movable property received by an individual or HUF charged to tax?

​Ans: If the following conditions are satisfied then value prescribed for movable property (*) received by an individual or HUF will be charged to tax​:

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

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.

($) Refer next FAQ for situations in which prescribed movable property received without consideration by an individual or HUF, i.e., received as gift is not charged to tax.​

Q.18 ​Are there any cases in which the value of prescribed movable property received without consideration, i.e., received as gift by an individual or HUF is not charged to tax?

​​Ans: If the conditions given in preceding FAQ are satisfied, then value of prescribed movable property received without consideration, i.e., received as gift by an individual or HUF is charged to tax. However, in the following cases nothing will be charged to tax in respect of prescribed movable property received without consideration:

  • Property received from relatives.
  • Property received by a HUF from its members.
  • Property received on the occasion of the marriage of the individual.
  • Property received under will/ by way of inheritance.
  • Property received in contemplation of death of the donor.
  • Property received from a local authority as defined under section 10(20​) of the Income-tax Act).
  • 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).
  • Property received from a trust or institution registered under section 12AA​.
  • Any shares received by an individual or HUF, as a consequence of business re-organisation of co-operative bank or demerger or amalgamation of a company [as referred to in clause (vicb) or clause (vid) or clause (vii) of Section 47]

Q.19 ​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?

Ans: 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.​

Illustration

During the financial year 2015-16, 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.

Q.20 ​Does any taxability arise if prescribed movable property is received by an individual or HUF for less than its fair market value?

Ans: If the following conditions are satisfied then prescribed movable property (*) received by an individual or HUF will be charged to tax ($):

  • Prescribed movable property is acquired by an individual or HUF.
  • The aggregate fair market value of such properties acquired by the taxpayer during the year exceeds the consideration of these properties by more than Rs. 50,000. In other words, the aggregate fair market value of all such properties is higher than the consideration and the difference is more than Rs. 50,000.

(*) 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.

Considering the above definition, nothing will be charged to tax if any movable property (other than those covered in the above definition) is received for less than its fair market value e.g., Nothing will be charged to tax in respect of a television set received for less than its fair market value because a television set is not covered in the definition of prescribed movable property.

($) Refer next FAQ for situations in which prescribed movable property received for less than its fair market value is not charged to tax.​

​Q.21 Are there any cases in which prescribed movable property received for less than its fair market value by an individual or HUF is not charged to tax?

​​Ans: If the conditions given in preceding FAQ are satisfied, then prescribed movable property received (i.e. acquired) by an individual or HUF for less than its fair market value is chargeable to tax. However, in the following cases nothing will be charged to tax in respect of prescribed movable property received for less​ than its fair market value:

  • Property received from relatives.
  • Property received by a HUF from its members.
  • Property received on the occasion of the marriage of the individual.
  • Property received under will/ by way of inheritance.
  • Property received in contemplation of death of the donor.
  • Property received from a local authority as defined under section 10(20) of the Income-tax Act.
  • 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).
  • Property received from a trust or institution registered under section 12AA​.

Illustration

During the financial year 2015-16, 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 1-4-2015, 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 1-7-2015, 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 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.

 (Source  – http://www.incometaxindia.gov.in, Republished with Amendments)

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Tags : FAQs (349) Gift (82) gift from relatives (31) gift in kind (31) section 56 (96) Tax on Gift (40)

49 responses to “Taxability of Gift received by an individual or HUF with FAQs”

  1. Rahul jain says:

    Sir I want to know about the if I being an huf family and purchasing goods which are not related to my business activities and those goods are given my huf to the member of huf.. So while purchasing these goods if I have pay GST means huf pays GST can huf take the benefit of GST

  2. SATHISH KUMAR says:

    Sir,
    I had gifted my father a cheque for Rs.25.00 lakh. He started an FD with the amount, making me as 2nd joint holder with my signature. But, the interest goes to his personal SB account monthly. Will it attract any tax liability to me. ?.

  3. Suresh says:

    Im filing my 2014-15,2015-16 IT returns now.My father in law gifted me 450000 cash on occasion of my marriage in august 2014 by taking loan from LIC.He had all the records regarding this loan.But I do not have any documentary evidence on receiving those amount as it is gifted in cash mode.I kept that amount for one year in home.After one year(in August 2015)I put that amount in bank FD.

    With out having documentary evidence,is it possible to claim as gifted income in 2014-15 IT returns?

    If it is not possible,may i show this amount in 2015-16 IT returns as gifted income as i have bank FD records?
    please clarify.

  4. Rajendra Vijayvargia says:

    An HUF can take the Cash Gift from his members or not.

  5. Nikita says:

    Hi,

    In case if we donate / gift an immovable property to a charitable / religious trust whether it will exempt or deduction is available. If not, what will be the tax consequences ?

  6. Nallendran says:

    Gift received by Celebrity

  7. Rahul Arya says:

    Excellent article.
    I have a doubt. There is no limit on the sum of money received but is there a limit on the number of people we receive gifts from? For eg, if 1000 people gift Rs. 1000 each to the new couple, then will the entire sum of Rs. 10 lacs be exempt?
    .
    Also, the income tax amendment of 2006 (available here: cbec.gov.in/resources//htdocs-cbec/income.pdf) states – “on or after the first day of september 2004 but before the first day of april 2006”. So is this “exemption for gifts received by non-relatives for any amount” valid now?

  8. Sanjay says:

    please advice whether a member of HUF, can gift money to HUF. whether it attract Sec. 56. If member wish to give interest free Loan to HUF, what they can do …

  9. chander says:

    Is there any tax implication if Rs 500000 is gifted by father to daughter?

  10. anil jain says:

    Can an HUF gift immovable/movable property valued at more than 50,000/- to any of its members/coparcners?
    Anil Jain
    9324091914

  11. Haresh Parekh says:

    Tenancy Rights are considered to be ‘Capital Asset’. If a tenant surrenders the ‘right’ without taking any compensation, or a ‘Landlord’ gives or accepts the ‘tenancy rights’ without adequate consideration; whether it would amount to ‘gift’ to ‘landlord’ or ‘tenant’?

  12. Anil Agrawal says:

    NO

  13. SANJAY says:

    Does sec 64 (Clubing of Income) is applicable if a member give a gift to its HUF and Vise a Versa. Does any other person (Relative of the karta) can also make a gift to HUF and what is the tax applicability.

  14. SANJAY says:

    does sec 64 (Clubing of Income) is applicable if a member give a gift to its HUF

  15. Bhavesh Panchal says:

    huf received 500000/- as gift from his father in law so i want to know how do its entry in account

  16. AbhiIJIT MUKHERJEE says:

    individual can gift (cash) to his own individual HUF file? and can he/she can gift (cash) to his parents or brither/sister HUF file? and is their any limit in financial year.

  17. Arya says:

    Sir, Along with my elder brother and elder sister, I own a house. All three of us are co-owner of this property. Now I want to relinquish my portion to my sister who will pay me 50 lakh, in installments of 5 lakhs per year for 10 years. Do I need to pay tax for this amount of 5 lakhs every year? Can I show this amount as a gift from my sister? Please advise. Thanks

  18. AJAY says:

    Can my son make a gift to my HUF. Will it be under tax liability. OR Can my son make a gift to my brothers HUF. Will it be under tax liability.

  19. bhavik says:

    I am an individual…..if i receive 1 lac rs in cash from the brother of my wife’s father…will this amount be taxable or not? please help me with this issue….thanks in advance!!

  20. SANJAY AGARWAL says:

    Will a gift made to the HUF by a member of the said HUF, will section 64(2) (clubbing of Income) will be applicable

  21. ANIL KUMAR GUPTA says:

    my friend wife is recd a flat from his father in the year 1968 by gift and the stamp duty is paid below 50,000 and that flat is sale in the month of 08/2014 what is the tax implication and long term capital gains, would u suggest how to file the return

  22. Mohit says:

    Sir,
    Father can gift more than 50000/- from saving bank account to son’s HUF for Birthday and anniversary of any members of HUF ? If yes than what is tax liabilities ? Thanks…

  23. ASHOK GARG says:

    Sir,

    My client received gifts on the occasion of Reception held after two weeks of marriage amounting to Rs. 5.00 (Apprx) from family friends. Will this amount will be exempted as gift received on the ‘occasion of Marriage’

  24. Mr. Guru says:

    I am not impressed with this forum. Despite several queries, there is no designated professional to guide us, unlike CAClub India where there arae many dedicated members to guide

  25. Tanushree says:

    Can anyone guide me regarding the taxability of any gift made by a HUF to its members?
    Whether such transfer attracts sec 56(2) or any other sec under the heads Income from Other Sources or Capital Gains or under any other tax law.

  26. Narendra says:

    Hi,

    Would you please help to understand that If I gift money (or Gold/ELSS etc) to my spouse then will I be eligible for any exemption?
    Thanks
    Narendra

  27. santi nath ghosh says:

    according to it law what is the purchase value of landed assets. whether it is actual value paid by the purchaser or value assessed by the registrar for registration fees

  28. u. Chatterjee says:

    sir,
    my bachelor uncle is thinking of gifting a flat to me or my wife. What will be implication of gift tax for me and my wife?

  29. R.SUBRAMANIAN says:

    whether a gift received by my grand children from my brother is exempt from gift tax if the amount is more than 50,000/-

  30. B.Chackrapani Warrier says:

    Read. Thanks.

  31. Raj says:

    If I transfer 3lac to my mother does she require to file tax. What is the tax impact on my salary can this be deducted from my taxable income ?
    Thanks

  32. Krishna says:

    …What is the meaning of Lineal Ascendant or Descendent in the following purpose ?
    Relative for this purpose means:
    (e) Any lineal ascendant or descendent of the individual;

    (f) Any lineal ascendant or descendent of the spouse of the individual;

  33. CA T N PRABHU says:

    SECTION 10(2A) CLEARLY SAYS THAT ANY INCOME FALLING WITHIN THAT S/S SHALL NOT BE INCLUDED IN COMPUTING THE TOTAL INCOME ie. SUBJECT TO THE PROVISIONS OF SUB-SECTION(2) OF SECTION 64, ANY SUM RECEIVED BY AN INDIVIDUAL AS A MEMBER OF HINDU UNDIVIDED FAMILY, WHERE SUCH SUM HAS BEEN PAID OUT OF THE INCOME OF THE FAMILY, OR, IN THE CASE OF ANY IMPARTIBLE ESTATE, WHERE SUCH SUM HAS BEEN PAID OUT OF THE INCOME OF THE ESTATE BELONGING TO THE FAMILY.
    Therefore amount received from HUF as gift or other sum does not constitute to be a gift and hence it is not specifically stated in the category of exempt list. I hope my view may not be differed by others.

  34. Ravindra says:

    Sir,
    MY son who is an NRI is transferring Rs. 15000/= through a bank every month as a help to me. (I am 70) Will this be a taxable income to me?please advise.

  35. Harish Bhagi says:

    Dear all,
    I have a question in my mind. I just want to know that only single friend can give us 50k(as a gift) or more friends in a single year.

  36. Makhan Jhaver says:

    Your view point on HUF is not correct. HUF has no relations . IF any karta / coparcener / member of HUF gifts to HUF in that case also if total amount recd from all members exceeds 50000 then also the amount becomes taxable… Pl clarify

  37. VIJAY says:

    If gift received in cash deposited in my account from my parents for helping me in buying a flat. is there any tax implication in this case?

    Look forward for your reply…

  38. S. Krishnamoorthy says:

    Dear Sir,
    Is the gift given by husband to wife and vice versa tax-free?

  39. satish boob says:

    dear sir,thxs.many f a q”s are answered and updated about gifts.but gifts in relation to h u f have been controversial issue in court of law because it has been upheld that h u f has no relatives like individuals.in our opinion this issue could be solved depending upon each fact of the case.

  40. Anil says:

    Dear Sir,

    While forming a new HUF, if cash more than 50000/- plus jewellery of Rs. 1000000/- is given by father of Karta of NEW HUF, then what will be taxability of amount received.

    • Arun says:

      Dear Sir,

      My Mother gifted me Rs. 2.0 Lacks. Can I take this money to my HUF ? Will IT attract any Tax?

      If I take it to my Individual account will it attract any Tax ?

      Please clarify.
      Thanks and regards,
      Arun.

  41. CA Sajanee Vakharia says:

    husband who has given divorce to first wife and got again married. Their son (i.e. of with second wife) has taken a gift from the first wife of his dad. would it be exempted as gift from relative or would be taxable? Reply urgently

  42. AK Sinha says:

    Can sister son (Bhanja)give gift to his Maternal uncle (Mama) an amount above 50k

  43. T.R.Surendran says:

    Dear Sir,

    I am 56 years old.I am an income tax payee since 1992. I
    have transferred Rs.5 lakhs from my salary a/c to my son’s bank a/c who is now 18 yrs old and is 1st yr engg student. I would like to transfer more money to his a/c for the safer side of his education. Is it necessary to file IT returns by him?. Is it necessary to
    keep any gift deed with him?

    Your response on the above matter will be highly appreciated.

    • V.S. Chauhan, Advocate says:

      Dear Mr. T.R.Surendran,

      It is not necessary to file income tax return by your son. Since, you are giving him
      money for his expenses. Kindly also note that the same amount is not taxable in the hand of your son. You can show in your account as drawing.

      Regards,

      V.S. Chauhan

  44. sonika jain says:

    yes this is tax free .

  45. ravi kumar says:

    Is gift received from my husbands mother tax free under gift from relative category. Pl advise.
    thanks

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