Gift receive gifts in cash, ornaments, land, car, gadgets, vouchers and many more on various occasions like on birthday, marriage, achievements and even sometimes out of gratitude too. Feel special and happy on its receipt, right? But have you ever bothered to check its taxability under Indian Income Tax Law?
If not, then here are the provisions of income tax law related to gift. Some of the gifting transactions are to be taxed under the Income Tax Act, 1961 and the onus to offer such gift for tax and then to pay tax on it; is on the recipient of such gift.
Remember in this article, we will be testing only those transactions for “taxability” which are having gift value exceeding Rs.50,000/- and that too received without consideration i.e. nothing is exchanged for such gift by an individual on or after October 1, 2009.
There are 3 aspects of the transaction which need to be considered in consolidation before concluding its taxability…
- Money or Property received as Gift.
- Relationship with the person gifting such money or property.
- Occasion on which gift is received.
i) Money or Property :-
Following are taxable gift under the law.
1. Money i.e. cash or cheque or draft.
2. Property: The term “Property” is specifically narrated in the law. So besides those items, other gifts will not come in the purview of taxability and property includes;
i. immovable property being land or building or both;
ii. shares and securities;
iii. jewellery;
iv. archaeological collections;
v. drawings;
vi. paintings;
vii. sculptures;
viii. any work of art;
ix. bullion (bullion w.e.f June 1, 2010)
Lesson: Receipt of Gift other than in Money or Property is not liable for tax.
ii) Relationship :-
Second aspect to be look upon is the relationship with the person gifting such money or property. Income Tax Act has excluded transactions of gift received from relatives from taxing and relative with respect to an individual includes;
i. spouse of the individual;
ii. brother or sister of the individual;
iii. brother or sister of the spouse of the individual;
iv. brother or sister of either of the parents of the individual;
v. any lineal ascendant or descendant of the individual;
vi. any lineal ascendant or descendant of the spouse of the individual;
vii. spouse of the person referred to in items (ii) to (vi)
Lesson: Receipt of Gift in Money or Property from a relative is not liable for tax.
iii) Occasions
Now coming to occasions, gift received on specified events or circumstances is excluded from taxability such as;
i. on the occasion of the marriage of the individual;
ii. under a will or by way of inheritance;
iii. in contemplation of death of the payer or donor;
iv. from any local authority;
v. from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in section 10(23C);
vi. from any trust or institution registered under section 12AA.
Lesson: Receipt of Gift in Money or Property from a relative or from a non-relative on specified occasion/circumstances is not liable for tax.
So whenever you will be doing a taxability test for a gift transaction, go by each of these step and conclude. But it is not as simple and straight as it looks; it also includes many other aspects relating to computation and documentation; so it is always advised to consult your Chartered Accountant on receipt of gift or if possible before entering into such gifting transactions.
Sharing this knowledge is a small gift from my side to you and this is surely not taxable, so enjoy it!
Question : Whether Gift received before
the introduction of section and matured
after introduction of section 56 (2)(v) be taxable ?
Asstt. CIT v. Anuj Agarwal [2010] 130
TTJ (Mum.) 49
In the course of search in the residence premises of the assessee
certain documents regarding gifts received by various members of
family from various persons in the form of India Millennium Deposits
Certificate (IMD) issued by State Bank of India in 2001 were found. As per the
terms and conditions of issue of IMD certificates, face value of the certificate
together with interest at the rate of 8.5 per cent per annum compounded half
yearly was payable on 29-12-2005 to the registered holder of this certificate.
These certificates were capable of being transferred by way of gift.
The assessee had received maturity amount on the certificate in
the previous year relevant to assessment year 2006-07. There was no dispute
that the assessee received gift of IMD certificates in financial year
2002-03. According to the Assessing Officer, since the maturity amount of IMD
was received by the assessee during the previous year in question, i.e.,
2005-06 provisions of section 56(2)(v) were applicable and,
therefore, he brought the principal amount or value of IMD to tax.
Held that the gift in question was complete prior to
19-7-2002. Provisions of section 56(2)(v) applied only to gift on
or after 1-9-2004.
Further, in the present case, what was given without consideration
was only IMD certificates. Prior to introduction of section 56(2)(vii)
by the Finance Act, 2009, with effect from 1-10-2009, gifts in kind
(India Millenium Deposit Certificates) were outside the purview of 56(2)(v)
or (vi).
Question Whether Mother's sister's son is relative and gift received is not taxable ?
Mother's sister's son is not a relative as per section 56(2)(v) and gift received from him is taxable [2013] 34 taxmann.com 267 (Chennai - Trib.) IN THE ITAT
CHENNAI BENCH 'A' Assistant
Commissioner of Income-tax, Company Circle - IV(3) v.Masanam Veerakumar
Question :Can the additions of Gift be made in the hands of HUF when the Assesee received cheques as gift in his individual name, but deposited same in HUF account ?
Where assessee received cheques as gift in his individual name, but deposited
same in HUF account, before making addition in hand of HUF matter to be
readjudicated for in-depth analysis ofsection 52(2)(vii) and section 64(2) [2015] 54
taxmann.com 221 (Madras) HIGH COURT OF MADRAS M.Veluswamy v. Income-tax
Officer, Ward - I (1), Pollachi
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