TAXATION OF GIFTS

 

In order to prevent the practice of receiving sum of money or the property without consideration or for inadequate consideration, Section 56(2)(x) of Income Tax Act, 1961 brings to tax any sum of money or the value of any property received by any person without consideration or the value of any property received for inadequate consideration.

 

From the taxation point of view, gift can be classified as follows:

1. Any sum of money received without consideration, it can be termed as ‘monetary gift’.

 

2. Immovable properties received without consideration, it can be termed as ‘gift of immovable property’.

 

3. Immovable properties acquired at a reduced price (i.e., for inadequate consideration), it can be termed as ‘immovable property received for less than its stamp duty value’.

 

4. Specified movable properties received without consideration, it can be termed as ‘gift of movable property’.

 

5. Specified movable properties received at a reduced price (i.e., for inadequate consideration), it can be termed as ‘movable property received for less than its fair market value’.

 

Following receipts by any person shall be considered as his income:

Categories	Nature of Receipt	Conditions to be satisfied for considering income	Extent of Income	Remarks
A	Any sum of money	During the previous year, such person has received any sum of money (cash, cheque, draft, etc.) from one or more persons.   Such sum is received without consideration.   The aggregate value of such receipt during the previous year exceeds  50,000.	Whole value shall be chargeable to tax under head Income from other source.	Aggregate amount of cash gift  received during the period shall be considered.
B	Any movable property	During the previous year, such person has received movable property from one or more persons   Such movable property is received without consideration   The aggregate fair market value of such receipts during the previous year exceeds ` 50,000   Such asset is a capital asset in hands of recipient.	The whole of the aggregate fair market value of such property shall be chargeable to tax under head Income from other source	Aggregate amount of gift  received during the period shall be considered.
C	Any movable property	During the previous year, such person has received movable property from one or more persons   Such movable property is received without consideration   Such consideration is less than the aggregate fair market value of the property by an amount exceeding ` 50,000   Such asset is a capital asset in hands of recipient.	The aggregate fair market value of such property Less consideration paid ,  shall be chargeable to tax under head Income from other source	Aggregate amount of gift  received during the period shall be considered.
D	Any immovable property	During the previous year, such person has received immovable property   Such immovable property is received without consideration.   The stamp duty value of such property exceeds 50,000   Such asset is a capital asset in hands of recipient.	The stamp duty value of such property shall be chargeable to tax under head Income from other source	The limit of 50,000/- is applicable per incidence
E	Any immovable property	During the previous year, such person has received immovable property   Such immovable property is received for a consideration   Stamp duty value of such property exceeds such consideration   Such excess is more than the higher of the following: 50,000 or 10% of the consideration	The stamp duty value of such property Less consideration paid, shall be chargeable to tax under head Income from other source	The limit (50,000/- or 5%) is applicable per incidence.

Non Applicability of Section 56(2)(x):-  In following specific circumstances, sum of money or movable/immovable property received will not be charged to tax:

 

1. In case of an Individual - Received from relatives. Relative for this purpose means- Spouse, Brother or sister, Brother or sister of the spouse, Brother or sister of either of the parents, Any lineal ascendant or descendent, Any lineal ascendant or descendent of the spouse, Spouse of the persons referred to above

 

2. In case of HUF - Received from any member thereof

 

3. Received on the occasion of the marriage of the individual,

 

4. Received under will/ by way of inheritance,

 

5. Received in contemplation of death of the payer or donor,

 

6. Received from a local authority

 

7. Received from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in section 10(23C)

 

8. Received from a trust or institution registered under section 12AA, or section 12AB

 

     9. Share received as a consequence of demerger or amalgamation of a company 

 

10. Share received as a consequence of business reorganization of a co-operative bank

 

Meaning of Property :-   (The definition given is exhaustive one.)

A capital asset of the assessee, namely,-

1. immovable property being land or building or both,
2. shares and securities,
3.  jewellery,
4.  archaeological collections,
5.  drawings,
6.  paintings,
7.  sculptures,
8. any work of art or bullion.

 

Article Compiled by:-

Mayank Garg

+91 9582627751

 

Disclaimer: Every effort has been made to avoid errors or omissions in this material in spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition In no event the author shall be liable for any direct indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information Many sources have been considered including newspapers , charted secretary etc.

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