|Taxability of Gifts -
are one of the most discussed topics and it becomes more interesting
when gifts are of a large sum/kind. One of the very important issues
while receiving or giving gifts arises as regards to its taxbility. Let
us understand various aspects of Gifts received in cash as well as in
kind under Indian Income Tax.
are the property or sum of money received without consideration or for
Section 56(2) of the Income Tax Act contains the provisions regarding
property or sum of money received without consideration and known as
- Gifts received from a relative
are not taxable at all-
relative is very important and defined to include the following
relatives of an individual:
- spouse of an individual i.e. husband/wife,
- brother or sister of an individual,
- brother or sister of spouse of individual(i.e.
wife's brother/sister or husband's brother/sister),
- brother or sister of either of the parents of
the individual(i.e. father's brother or sister, mother's brother or
- any lineal ascendant of the individual
(i.e. parents, grand parents, great grand parents....)
- any lineal descendant of the individual (i.e.
children, grand children....)
- any lineal ascendant or descendant of the
spouse of individual (i.e. parents, grand parents, great grand parents
can see the definition of relatives includes all the major
relationships of an individual and gifts received from any of them is
fully exempt from tax.
- spouse of the persons from 2 to 7 above
- Gifts received on following
occassions are also not taxable:
received on the occassion of marriage of the individual
- A nice relaxation to the the people getting married is that gifts
received at the time of marriage are fully exempt and there is no
monetary limit to this. But one must remember that gifts received on
marriage anniversary, engagements etc. are not covered under this rule
and are therefore taxable as income from other sources subject
the applicable limits.
received under a will or by way of inheritance- One more
explicit category of gifts which is not taxable under Income Tax are
gifts received under a will/ inheritance.
received from a person other than a relative and on occassion other
than marriage are not taxable upto a total of Rs. 50000/-
in an year from a person other than relative and on occassion
other than marriage exceeding Rs. 50000/- are taxable as
from other sources. If gifts falling in this category for a particular
year exceed Rs. 50000/- the total amount of gifts will become the
income and will be taxable. For example lets take a case of Mr. X for
the year 2012-13:
- Mr. X received a cash gift Rs. 35000 from his
friend Mr. Y - here Rs. 35000 being less than 50000 will be exempt from
Mr. X receives another gift from Mr. Z of Rs. 18000 - Now the total
amount of gifts received by Mr. X from unrelated persons is Rs. 53000
which is more than the limit of 50000, Mr. X is required to pay tax on
entire Rs. 53000 as his income from other sources.
a nut shell, gifts from non relatives are exempt but only upto Rs.
50000, if gifts from non relatives exceed Rs. 50000 the total amount of
gifts received in the year from non relatives will be taxable.
We can sum up that
following gifts are not taxable at all:
- Gifts received from any one at the time of
marriage are not taxable.
- Gifts received from the near relatives are not
taxable. (Term relative should be understood clearly)
- Gifts received from non relatives upto Rs.
50000 are not taxable.
- Gifts received under WILL or inherited are not
for taxability of gifts in kind (gifts in the form of House Property,
Car, Jewellery, Shares etc.) are applicable on the basis of the value
of such gifts. The important part to arrive at in case of gifts in kind
is to understand and calculate the value of such gifts received in
of Immovable Property:
- Where gift ie. property is received without
consideration and the Stamp
Duty Value of the property exceeds Rs. 50000; Stamp Duty
Value shall be considered.
- Where gift ie.
property is received for consideration and considertion is less than
the stamp duty value of the property by Rs. 50000, Satmp duty value
reduced by the amount of consideration will be considered.
of Property other than immovable property:
- Where gift is received without
consideration and the Aggregate
Fair Market Value of the property exceeds Rs. 50000;
Aggregate Fair Market Value shall be considered.
gift is received for consideration and considertion
is less than the Aggregate Fair Market Value of the property
Rs. 50000, Aggregate Fair Market Value reduced by the amount of
consideration will be considered.
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