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.

gift tax

 

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

 

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