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Gifts tax

Taxability of Monetary Gifts, Immovable Property & Prescribed Movable Property received for adequate or inadequate consideration

Taxability of Gifts received by an Individual or Hindu Undivided Family (HUF)   Any 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. As per the Income Tax Act, 1961 which was amended in 2017, any gifts received by any person or persons are taxed in the hands of the recipient under the head ‘Income from other sources’ at normal tax rates under section 56(2)(x). From the taxation point of view, gifts can be classified as follows: Any sum of money received without consideration, is termed as ‘monetary gifts’.   Specified movable properties received without consideration, is termed as ‘gift of movable property’.   Specified movable properties received at a reduced price (i.e., for inadequate consideration), is termed as ‘movable property received for less than its fair market value’.   Immovable properties received without consideration; is termed as ‘gift of immovable property’.   Immovable properties acquired at a reduced price (i.e., for inadequate consideration), is termed as ‘immovable property received for less than its stamp duty value’.   Tax treatment of monetary gifts received by an Individual or Hindu Undivided Family (HUF)   Any sum of money received without consideration (i.e., monetary gift may be received in cash, cheque, draft, etc.) by an individual/ HUF will be charged to tax if following conditions are satisfied –   Sum of money received without consideration. The aggregate value of such sum of money received during the financial year exceeds Rs. 50,000.   Provisions relating to gift applies in case of every person, but gifts by a resident person to a non-resident are claimed to be non-taxable in India as the income does not accrue or arise in India to ensure that such gifts made by residents to a non-resident person are subjected to tax in India, the Finance Act, 2019 has inserted a new clause (viii) under Section 9 of the Income-tax Act to provide that any income arising outside India, being money paid without consideration on or after 05-07-2019, by a person resident in India to a non-resident or a foreign company shall be deemed to accrue or arise in India.   Cases in which sum of money received without consideration, i.e., monetary gift received by an individual or HUF is not charged to tax –    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   Money received on the occasion of the marriage of the individual.   Any distribution of capital assets on total or partial partition of a HUF   Money received under will/ by way of inheritance.   Money received in contemplation of death of the payer or donor.   Money received from a local authority.   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). [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 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.Note –   i) Gifts received on the occasion of marriage of the individual is not charged to tax. Apart from marriage there is no other occasion when monetary gift received by an individual is not charged to tax. Hence, monetary gift received on occasions like birthday, anniversary, etc. will be charged to tax.   ii) Gifts received from relatives are not charged to tax (meaning of ‘relative’ has been discussed above). Friend is not a ‘relative’ as defined in the above list & hence, gifts received from friends will be charged to tax (if other criteria of taxing gift are satisfied). For example – Mr. X received monetary consideration as gifts from his 5 friends in a financial year which is as follows: Mr. A – Rs 8,000, Mr. B – Rs 16,000, Mr. C – Rs 9,000, Mr. D – Rs 14,000 & Mr. E – Rs 13,000.Although the total amount received by Mr. X from his all 5 friends does not exceeds Rs 50,000 individually, but since the aggregate value of amount received from all the 5 friends exceeds Rs 50,000 in a financial year. The whole amount of Rs 60,000 will be added to his income & tax as per his income tax slab rates.   iii) Once the aggregate value of gifts received during the year exceeds Rs. 50,000 then all gifts are charged to tax – 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 total value of all such gifts received during the year will be charged to tax (i.e., the total amount of gift & not the amount in

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