What does the Income Tax Act say about gifts?
The I-T Department considers:
- money given in cash/cheque or drafts
- immovable property such as land or building or both
- movable property like shares, jewellery, drawings, paintings or sculptures, gold bars as gifts.
When are gifts exempt from tax?
You are exempt from tax under the following situations:
- monetary value of all gifts received don’t add up to Rs.50,000.
- Received from a relative (see below)
- Received on occasion of marriage
- Received by way of a will or inheritance
- Received in contemplation of death of the payer
- Received from Local Authority
- Received from a fund, foundation, university, or other educational institution, hospitals, or any trust of institution defined in Section 10(23C)
- Money Received from a charitable Institution registered under section 12AA
Who is a relative?
- Your immediate family – parents, siblings, spouse and children
- Your spouse’s parents and siblings
- Your parents’ siblings
- Your siblings and their spouses
How are gifts taxed?
These are chargeable under the head “Income from Other Sources” in the receiver’s income tax returns
|Gift received||Condition||Tax treatment|
|Money||Total money received as gift exceeds Rs. 50,000.||Chargeable to tax|
|Immovable Property received as a gift||Stamp Duty value of property exceeds Rs.50,000||Stamp Duty value chargeable to tax|
|Immovable Property received with some consideration||Stamp Duty Less Consideration > Rs.50,000||Amount Chargeable to Tax = Stamp Duty – Consideration|
|Movable Property without any consideration||Fair Market Value of property > Rs.50,000||Total Fair Market Value is chargeable to tax|
|Movable Property with some consideration||Total Fair Market Value Less Consideration > Rs. 50,000||Amount Chargeable to Tax = Total FMV – Consideration|