Taxability of gifts on immovable and movable property from 1st October, 2009, Tax Free Gifts, Relative defined
Gift was taxable under Gift Tax Act up to 31st September, 2004. From 1st October, 2004, gift is taxed as income under Section 56 of Income-tax Act, 1961 under head income from other sources.
Section 56, provided that from 1st October, 2004, if an Individual or Hindu Undivided Family (HUF) receives any sum of money exceeding Rupees twenty-five thousand without consideration then the amount shall be treated as income. Form 1st April, 2006 to 30th September, 2009 this limit is raised to Rupees Fifty Thousand.
Gift must be received by individual or HUF. Any amount received by firm, AOP, Company or any assessee other then Individual or HUF is not taxable under Section 56(1).
Even if sum of money is received from Non-Resident Bank Account, of from any Non-resident (not being specified relative) will be taxed as income.
Any amount by Non-Resident will be treated at par with Resident. If received in India will be taxable.
The amount must refer to sum of money, From 1st October, 2009 any immovable or movable property received without consideration or received without adequate consideration will be treated as income.
The limit is applicable for aggregate amount and not for single transaction. If the aggregate amount is less than or equal to Rs.25,000/- or Rs.50,000/-, which ever is applicable, then the amount will be exempted. Aggregate amount beginning from Rs.25,001/- and Rs.50,001/- will be taxable.
From 1st October, 2009 the limit of Rs.50,000/- is not changed but where any immovable property or movable property is received without consideration or inadequate consideration the value of the same above Rs.50,000/- is added to income. Consideration must be valued based on stamp duty value of the property. Consideration is considered inadequate when the value/consideration is less than fair market value as valued for stamp duty purpose. Consideration or inadequate consideration above Rs.50,000/- is to be added to income. (Note reading of section 56 indicates that Rs.50,000/- limit will be calculated separately for ‘sum of money’, ‘immovable property’ and ‘immovable property’. Thus total exemption from income will be Rs.1,50,000/-.???).
Property has be exhaustively defined for the purpose of section 56. Property means (i) immovable property being land or building or both, ii) shares and securities, (iii) jewellery, (iv) archaeological collections, (v) drawings, (vi) paintings, (vii) sculptures or (viii) any work of art.
The following Gifts will be exempted i.e not to be included in income:
(a) any gift received any relative, or;
(b) any gift received on the occasion of the marriage of the individual. The gift also received from non-relative is exempted; or
(c) any sum received under a will or by way of inheritance; or
(d) any sum received in contemplation of death of the payer; or
(e) from any local authority as defined in the Explanation to clause (20) of section 10; or
(f) 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 clause (23C) of section 10, i.e. any donation, etc; or
(g) from any trust or institution registered under section 12AA.
“relative” shall mean—
(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 clauses (ii) to (vi);
Example of Relative of an Individual :
| Sr. No. | Relative of Mr.A | Relative Name, details........... |
| 1. | Spouse of Mr.A, | His wife Mrs. A |
| 2. | His Brother and Sister | Mr.B and Mrs. S |
| 3. | Spouse of Brother and Sister | Mrs. SB wife of Mr. B and Mr.SS husband of Mrs. S (साला, साली देवर, देरानी, जेठ, जेठानी) |
4. | Brother and Sister of Parents of Individual. | Mr.UF, uncle of Mr. A, Mrs. AF aunty of Mr.A, Mr.UM, maternal uncle of Mr. A, Mrs. AM maternal aunt of Mr. A (चाचा, बुआ, मामा, मासी) |
5. | Lineal Ascendant and Descent | i.e. father mother, grand father, grand mother, son, grandson, daughter, grand daughter and so on (माँ, बाप, दादा दादी, बेटा, बेटी, पोता, पोती, etc) |
| 6. | Spouse of above mentioned relative. | चाची, बुआ के पति, मामी, मासा, ब्ह्वु, etc. |
Gift is received from above mentioned relatives it will not be included as income of the individual or HUF. The Gift amount will be tax-free.
Capital gains on Sale of Property received as gift after 1st October, 2009 ...
Reference: to Income-tax Act, 1961, Section 56.
F.—Income from other sources
Income from other sources.
Section 56.
(1)
(2)
[(v) where any sum of money exceeding twenty-five thousand rupees is received without consideration by an individual or a Hindu undivided family from any person on or after the 1st day of September, 2004 [but before the 1st day of April, 2006], the whole of such sum :
Provided that this clause shall not apply to any sum of money received—
(a) from any relative; or
(b) on the occasion of the marriage of the individual; or
(c) under a will or by way of inheritance; or
(d) in contemplation of death of the payer; or
(e) from any local authority as defined in the Explanation to clause (20) of section 10; or
(f) 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 clause (23C) of section 10; or
(g) from any trust or institution registered under section 12AA.
Explanation.—For the purposes of this clause, “relative” means—
(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 clauses (ii) to (vi);]
Inserted by the Taxation Laws (Amendment) Act, 2006, w.e.f. 1-4-2007.
[(vi) where any sum of money, the aggregate value of which exceeds fifty thousand rupees, is received without consideration, by an individual or a Hindu undivided family, in any previous year from any person or persons on or after the 1st day of April, 2006 [but before the 1st day of October, 2009], the whole of the aggregate value of such sum:
Provided that this clause shall not apply to any sum of money received—
(a) from any relative; or
(b) on the occasion of the marriage of the individual; or
(c) under a will or by way of inheritance; or
(d) in contemplation of death of the payer; or
(e) from any local authority as defined in the Explanation to clause (20) of section 10; or
(f) 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 clause (23C) of section 10; or
(g) from any trust or institution registered under section 12AA.
Explanation.—For the purposes of this clause, “relative” means—
(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 clauses (ii) to (vi);]
Inserted by the Finance (No. 2) Act, 2009, w.e.f. 1-10-2009.
[(vii) where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009,—
(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;
(b) any immovable property,—
(i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;
(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;
(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;
(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 :
Provided that where the stamp duty value of immovable property as referred to in sub-clause (b) is disputed by the assessee on grounds mentioned in sub-section (2) of section the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of section 50C and sub-section (15) of section 155 shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of sub-clause (b) as they apply for valuation of capital asset under those sections :
Provided further that this clause shall not apply to any sum of money or any property received—
(a) from any relative; or
(b) on the occasion of the marriage of the individual; or
(c) under a will or by way of inheritance; or
(d) in contemplation of death of the payer or donor, as the case may be; or
(e) from any local authority as defined in the Explanation to clause (20) of section 10; or
(f) 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 clause (23C) of section; or
(g) from any trust or institution registered under section 12AA.
Explanation.—For the purposes of this clause,—
(a) “assessable” shall have the meaning assigned to it in the Explanation 2 to sub-section (2) of section 50;
(b) “fair market value” of a property, other than an immovable property, means the value determined in accordance with the method as may be prescribed;
(c) “jewellery” shall have the meaning assigned to it in the Explanation to sub-clause (ii) of clause (14) of section 2;
(d) “property” means—
(i) immovable property being land or building or both;
(ii) shares and securities;
(iii) jewellery;
(iv) archaeological collections;
(v) drawings;
(vi) paintings;
(vii) sculptures; or
(viii) any work of art;
(e) “relative” shall have the meaning assigned to it in the Explanation to clause (vi) of sub-section (2) of this section;
(f) “stamp duty value” means the value adopted or assessed or assessable by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property.]
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