Receipts without/inadequate consideration [ Section 56(2)] [Applicable from AY 2005-06 onward]
Page Contents
- 1. Four categories chargeable to tax
- 2. Gits which are Exempted from Tax
- 3. List of Relatives, Gift from Whom is Exempt from Taxes
- 4. Other relevant points related to Tax on Gift :
- 5. Valuation Rules Related To Gifts
- 6. Receipt of shares by a Firm or a closely held company
- 7. Share premium in excess of fair market value [ S.56(2)(viib)]
1. Four categories chargeable to tax
A receipt of sum of money or property* without consideration chargeable to tax under S. 56(2)(VII) if the following condition are satisfied.
1. Individual or HUF
2. Received on or after 01.10.2009 and before 01.04.2017
3. Sum of money or property falls in any of the following category
4. It does not fall under exempted category
Category
| Categories | Tax Treatment | For ceiling of Rs. 50000 single transaction or all transaction of the Previous Year will be considered. |
| 1. Any sum of money [ gift in cash, cheque or draft] | Aggregate amount of sum of money from one or more persons during the PY exceeding Rs. 50000 shall be chargeable to tax | All transaction |
| 2. Immovable property without consideration | Any immovable property is received without any consideration , the stamp duty value of which exceeds Rs. 50000 ,will be chargeable to tax . | Single transaction |
| 3. Immovable property for a consideration (wef A.y 2014-15) | Any immovable property received for consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupee.Than the stamp duty value of such property exceeding such consideration shall be taxable.
However wef A.y 2019-20, the above provision has been amended which is as follows:U/s 562(x) For a consideration , the stamp duty value of which exceeds 105 percent of the consideration and the difference between stamp duty and consideration exceeds Rs 50000, than the difference amount between stamp duty and consideration shall be taxable as income from other source. It should be noted that, that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes provided that the the amount of consideration for the said immovable property , or a part thereof, has been paid by any mode other than cash on or before the date of the agreement for the transfer of such immovable property.
|
Single transaction |
| 4. Movable property** without consideration | If aggregate fair market value of the movable properties received without consideration during PY exceeds Rs. 50000 whole market value shall be chargeable to tax. | All transaction |
| 5. Movable property for consideration which is less than the market value | If the consideration is less than the fair market value of the property by an amount exceeding Rs. 50000 , then difference is chargeable to tax. | All transaction |
Property** property for this purpose means the following capital assets of the assessee i.e. recipient : immovable property being land or building or both, shares and securities, jewellery, Archaeological collection, drawings , painting, sculpture, any art of work or bullion.
2. Gits which are Exempted from Tax
1. Money or property received from relative
2. Money or property received on the occasion of marriage
3. Money or property received by way of will or inheritance
4. Money or property received on contemplation of death
5. Money or property received from local authority
6. Money or property received from any fund, foundation, university, other educational institute, hospital, medical institution, any trust or institution referred in Sec. 10[23C].
7. Money or property received from any charitable institute registered under section 12AA.
3. List of Relatives, Gift from Whom is Exempt from Taxes
| List of Male Donors | List of Female Donors |
| Father (Papa or Pitaji) | Mother (Maa or Mummy) |
| Brother (Bhai) | Sister (Bahin) |
| Son (Beta or Putra) | Daughter (Beti or Putri) |
| Grand Son (Pota or Potra) | Grand Daughter (Poti or Potri) |
| Husband (Pati) | Wife (Patni) |
| Sister’s Husband (Jija) | Brother’s Wife (Bhabhi) |
| Wife’s Brother (Sala) | Wife’s Sister (Sali) |
| Husband’s Brother (Dewar) | Husband’s Sister (Nanad) |
| Mother’s Brother (Mama) | Mother’s Sister (Mausi) |
| Mother’s Sister Husband (Mausa) | Wife’s brother’s wife (Sala Heli) |
| Father’s Brother (Chaha or Tau) | Father’s Brother’s Wife (Chachi or Tai) |
| Father’s Sister’s Husband(Fufa) | Father’s Sister (Bua) |
| Grand Father (Dada) | Grand Mother (Dadi) |
| Great Grand Father (Pardada) | Great Grand Mother (Pardadi) |
| Daughter’s Husband (Jawai) | Son’s Wife (Bahu or Putra Vadhu) |
| Wife’s Father (Sasur) | Wife’s Mother (Sas) |
| Husband’s Father (Sasur) | Husband’s Mother (Sas) |
| Wife’s Grand Father (Dada Sasur) | Husband’s Grand Mother (DadiSas) |
| Husband’s Grand Father (Dada Sasur) | Wife’s Grand Mother (Dadi Sas) |
| Wife’s Great Grand Father(Bada Dada Sasur) | Husband’s Great Grand Mother (Badi Dadi Sas) |
| Husband’s Great Grand Father(Bada Dada Sasur) | Wife’s Great Grand Mother (Badi Dadi Sas) |
| Brother’s Wife(Bhabhi) | Mother’s Brother’s Wife (Mami) |
| Husband’s Brother’s Wife(Devrani or Jithani) |
1. In the case of movable property value to be considered shall be fair market value as on the date of receipt.
2. In case of immovable property, the value of the property shall be stamp duty value of the property.
3. Gift received by HUF from its member shall be treated as gift received from relative.
4. The provision is applicable whether recipient/ Donor is resident or non resident.
5. Gift of agriculture land situated in rural area in India , is not chargeable to tax in the hand of recipient as the agriculture land is not capital assets under Section 2[14].
5. Valuation Rules Related To Gifts
| Properties | Valuation |
| Immovable property | Stamp duty value |
| Jewellery, Archaeological collection, drawings , painting, sculpture, any art of work or bullion | 1. If purchased from registered dealer, Invoice value shall be the fair market value.
2. In any other case, the price of the assets shall be if it is sold in the open market,and if the value of jewellery exceeds Rs 50000, the asseesee may obtain the report of registered valuer. |
| Quoted shares and securities through transaction in recognized stock exchange | Value as recorded in stock exchange. |
| Quoted shares and securities [ not being received through transaction in recognized stock exchange] | Lowest price of such shares traded in any recognized stock exchange in India. |
| Unquoted equity shares | =Net worth*paid up value one share/total amount of paid up equity shares capital as shown in the balance sheet. |
| Other unquoted shares and securities | Market value shall be the price it would fetch if sold in the open market on the valuation date and the assessee may get report from category -1 Merchant Banker or Chartered Accountants in respect of such valuation |
Some Examples :
| Question | Answer |
| 1. On June 1,2018, X get gift of House property in Delhi of Rs. 50 lacs [ Stamp duty value same]. from Y and property valuing Rs. 50000 in Nagpur from Z. | X will be taxed for Delhi property of Rs. 50 lacs under the head “income from other sources” though the Nagpur property will not be taxed as it does not exceed Rs. 50000. In the hand of Y and Z, nothing will be tax as capital gain as gift is not treated a transfer under sec. 47[iii] and section 50C has no role to play |
| 2. A purchased property on 31.03.2017 from X in Delhi for Rs. 30 lacs stamp duty value of the property is Rs.50 lacs. What is chargeability of the same under S. 56(2). | Rs 20 Lacs (as the difference between the consideration and the stamp duty value is more than Rs 50,000) will be chargeable in the hand of A under the head “income from other sources”. Cost of acquisition of property for A shall be Rs. 50 lacs for further sale and capital gain . In the hand X, value of property sold shall be Rs. 50 lacs under S. 50C. for capital gain purpose.
However A.y 2019-20, nothing shall be taxable in the above cases , as the stamp duty value does not exceeds the consideration amount by 105 percent
|
| 3. Immovable property received as gift in Stock in trade by A from X of the value of Rs. 50 lacs. | Section 56[2][viii] shall be applicable only when property is received as capital assets. Since house property in the hand of A is as stock in trade , nothing shall be taxable. |
| 4. Motor car received as gift. | Nothing is taxable under S. 56[2][vii]. |
| 5. X receive property under will . | Not taxable. |
Clause (viia) has been inserted in section 56(2) with effect from 1.6.2010 . this is applicable if the following conditions are satisfied –
1. Recipient is form or closely held company[ company in which the public are not substantially interested.
2. The assets which is received is in the form of share in closely held company.
3. These shares are received from any person.
4. Such shares are received on or after 1.6.2010but before 01.04.2017
5. Such shares are received without consideration or for inadequate consideration.
6. Such shares are not received by way of transaction referred to in Sec. 47[via]/[vic]/[vicb]/[vid]/[vii].
Consequences if these conditions are satisfied.
| Situations | Taxabiity |
| 1.shares are received without consideration and aggregate value of shares does not exceed Rs. 50000. | Nothing is taxable. |
| 2.shares are received without consideration and aggregate value of shares exceed Rs. 50000. | Aggregate fair value of shares shall be taxable in the hand of recipient. |
| 3.shares are received for consideration which is less than the fair market value and the aggregate difference does not exceed Rs. 50000. | Nothing is taxable |
| 4. shares are received for consideration which is less than the fair market value and the aggregate difference exceed Rs. 50000. | Aggregate fair market value minus the aggregate consideration will be taxable in the hand of the recipient. |
For transaction referred in section 56(2)(vii) and 56(2)(viia),takes place on or after 01.4.2017 section 56(2)(x) will applicable, which says,
where any person receives, in any previous year, from any person or persons
(a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum shall be taxable as income from other source.
(b) any immovable property,—
(i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property shall be taxable as income from other source
(ii) for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration. However wef A.y 2019-20, immovable property received for a consideration , the stamp duty value of which exceeds 105 percent of the consideration and the difference between stamp duty and consideration exceeds Rs 50000, than the difference amount between stamp duty and consideration shall be taxable as income from other source
It should be noted that, that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes provided that the the amount of consideration for the said immovable property , or a part thereof, has been paid by any mode other than cash on or before the date of the agreement for the transfer of such immovable property.
(c) any property, other than immovable property,—
(i) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property shall be taxable as income from other source
(ii) 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 shall be taxable as income from other source
Applicable from assessment year 2013-14.
Where a company [ not being company in which the public are substantially interested] received in any previous year from any resident person, any consideration for issue of shares . If the consideration for issue of shares exceed the face value of such shares, the aggregate of consideration exceeding the market value of shares shall be taxable in the hand of recipient company under the head ‘ income from other sources”
The fair market value of the shares shall be the higher of the value:
a] as may be determined in accordance with the prescribed method; or
b] as may be substantiated by company to the satisfaction of the assessing officer, based on the value of its assets, including tangible assets, being goodwill, know how, patent, copyright, trademark, licences, franchises, or any other business or commercial right of similar nature.
This provision is not applicable in the following two cases:
1. Where the consideration is being received by venture capital undertaking from venture capital company or venture capital fund ; or
2. Where the consideration for issue of shares is received by company from a class or classes of person as notified by the Central Government.
Article written By CA Sanjeev Singhal, FCA, DISA [ ICAI]
Also Read: https://taxguru.in/income-tax/taxability-gifts-received-relatives-relatives.html
(Republished With Amendments)
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i am working in a private limited company ( Indian) owns few offices in Maharashtra , now director desire to gift this offices from company to himself. My first question whether it is allowed in the eyes of law. 2. If yes then what will be tax quantum in recipient hand & i have to show as other source of income. 3. Can we claim deduction u/s 54 ( keeping in nature the transaction of transfer of immovable property)