There are numerous traditions and thousands of years of history associated with Indian culture. It is also the birthplace of numerous religions, including Buddhism, Sikhism, and Hinduism. Plus, India is a country with an expanded culture where each event is a motivation to celebrate and show love and warmth to close relatives and companions. Presents are traded on various events like Diwali, Raksha Bandhan, Christmas, New Year and so forth. In addition, some people view giving gifts as a way to show their status. However, you were unaware that these gifts are taxable after a certain threshold and that recipients must pay income tax on gifts they receive. Accordingly, the Public authority of India presented Gift Duty in April, 1958 managed by the Gift Act, 1958 (GTA). It was introduced with the intention of levying a tax on gifts received and given in specific circumstances. It is essential to realize tax collection associated with respect to gifts in India to keep away from any further impromptu duty surge. The Gift Act of 1958 imposed taxation on gifts that were received by the recipient. However, in 1988, it was eventually eliminated. In addition, it was reintroduced six years later under section 56(2)(V) of the Income Tax Act of 1961 to tax gift received by an individual or HUF.
Gift Definition as per Income Tax Act
Gift as per Income tax act means property i.e both movable like shares, jewelry, or drawings etc and immovable like land or a building and money (cash, cheque, draft, etc) received without or inadequate consideration.
Income tax rules on Gifts
Gift received by an individual or HUF ( Hindu Undivided Family) without or against inadequate consideration (i.e., monetary gift may be received in cash, cheque, draft, etc.) will be charged to tax if
- Sum of money received without consideration & The aggregate value of such sum of money received during the year exceeds Rs. 50,000.
- Immovable property, being land or building or both, is received by an individual/HUF & immovable property is a capital asset within the meaning of section 2(14). The stamp duty value of such immovable property received without consideration exceeds Rs. 50,000.
- Prescribed movable property is received without consideration & the aggregate fair market value of such property received by the taxpayer during the year exceeds Rs. 50,000.
Exceptions where Gift Received by an Individual or HUF is not chargeable to Tax:
- Gift received by an individual or HUF from relatives.
- Gift received on the occasion of the marriage of the individual.
- Gift received under will/ by way of inheritance.
- Gift received in contemplation of death of the payer or donor.
- Gift received from a local authority [as defined in Explanation to section 10(20) of the Income-tax Act].
- Gift received from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in section 10(23C). [w.e.f. AY 2023-24, this exemption is not available if a sum of money is received by a specified person referred to in section 13(3)]
- Gift received from or by a trust or institution registered under section 12A, 12AA or section 12AB [w.e.f. AY 2023-24, this exemption is not available if a sum of money is received by a specified person referred to in section 13(3)].
- Money received by any fund or trust or institution, any university or other educational institution or any hospital or other medical institution referred to in section 10(23C)(iv)/(v)/(vi)/(via).
- Money received as a consequence of demerger or amalgamation of a company or business reorganization of a co-operative bank under section 47.
- Property received by way of transaction not regarded as transfer under clause (viiac)/(viiad)/(viiae)/(viiaf) of section 47.
- Property received from an individual by a trust created or established solely for the benefit of relatives of the individual.
Meaning of Relatives
In Case of an Individual
- 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 descendent of the individual
- Any lineal ascendant or descendent of the spouse of the individual
- Spouse of the persons referred to in (b) to (f).
In Case of HUF
- Any member thereof.
FAQ's
If you get a gift worth up to Rs. 50000 in a year from friends or acquaintances, then it has been kept tax free.
There is also no tax on gifts received after someone's death, in his will.
If the value of the gifts received from a friend exceeds Rs 50,000, then the full value of the gifts is considered taxable.
Gifts received from relatives are not charged to tax. Friend is not a ‘relative’ as defined in the list and hence, gifts received from friends during the year are chargeable to tax if received exceeding the specified limit.
Gifts received from India or abroad will be charged to tax If the aggregate value of monetary gift received by an individual or HUF during the year exceeds Rs. 50,000 and the gifts are not covered under the exceptions as given in the law.
Gift of immovable property will be charged to tax whether the property is located in India or abroad If the conditions regarding the taxability of gift of immovable property are satisfied.
The Income-tax Act has also designed provisions for taxability of immovable property received for less than its stamp duty value. Immovable property received by an individual or HUF for less than its stamp duty value will be charged to tax If following conditions are satisfied.
- 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 individuals or HUF.
- Such property is acquired for a consideration but the consideration is less than the stamp duty value and the difference exceeds higher of Rs. 50,000 and 10% of the consideration w.e.f AY 2021-2022.
Movable property received by an individual or HUF for less than its fair market value will be charged to tax If the following conditions are satisfied:
- 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 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.
