In this blog, we are going to understand the taxability of Gift in India, in case of individual.
Gift is a sum of money or movable property (jewelry, shares etc.) or immovable property (house, plot, land etc) received or acquired by an individual without consideration or adequate consideration.
If a person resident or non-resident including NRI/OCI/PIO/Foreign nationals receive a gift in India it is taxable if it is more than INR 50,000.
However, the gift as mentioned above will be tax free irrespective of the amount in the following cases:
- Gift received from a Relative. Relatives for this purpose means:
b) Brother or sister
c) Brother or sister of spouse
d) Brother or sister of either of parents
e) Any lineal ascendant or descendant
f) Any lineal ascendant or descendant of spouse
g) Spouse of person referred to in (b) to (f)
- Gift received on the occasion of marriage
- Gift received under will or by way of any inheritance
- Gift received in contemplation of death of payer.
- Gift received from local authority, funds, foundations, university, educational institution, hospital, trust etc as specified under the provisions of Income Tax Act, 1961
- Gift received as consequences of demerger or amalgamation etc as specified under the provisions of Income Tax act, 1961
- Gift received only on occasion of marriage of individual is not charged to tax but if it receives on any other occasions like birthday, anniversary etc it will be charge to tax.
- Gift received only from a person who fulfils the definition of relative is not charge to tax. It means gift received from friends are taxable. Interestingly, gift received from maternal grandparents is still a point of argument as one view is that lineal ascendant or descendant doesn’t cover mother side.
- If gift is not covered under any exemption, then it will taxable even it is received from abroad.
- All Gifts are taxable if aggregate value of such gifts exceeds Rs. 50,000. For example, on an occasion of birthday an individual received Rs. 5,000 each from his 11 friends. In this case, aggregate value is more than Rs. 50,000, hence, total Rs. 55,000 will be taxable in his hand.
- Movable property means shares/ securities, jewelry, archaeological collections, drawings, paintings, sculptures or any work of art and bullion, being capital asset includes virtual digital assets. Gift of car, mobile phone, laptop, watches, Television etc are not taxable as it is not covered under definition of movable asset.
- NRI/PIO/OCI/Foreign national cannot receive agriculture land as a gift. Though sale proceeds of agriculture land can be given them a gift. They can receive agriculture land out of inheritance or will.
- It is always advisable to execute proper document to record the gift and better to pictures, bills, invoices etc. as supporting documents.
- In case of immovable property received as a Gift, proper gift deed shall be executed with local authorities and applicable stamp duty should be paid.
- In case of gift of Movable property or Cash, it can be documented on a plain paper as a gift declaration mentioning about the relationship, amount/property details, dates etc. and also mentioning that it is an irrevocable gift out of love and affection and donee is at liberty to utilize money as he/she deems fit.
- In case of gift to spouse, daughter in law or any revocable gift, any income earned on the gifted money is clubbed in the income of donner/payer as per the specified provisions of Income Tax act, 1961.
- There is no Gift Tax as such in India. If Gift received is not covered under exemption, then it will be taxable as per slab rate under head Other sources of Income Tax.
Disclaimer: This article is just to make you understand about very basics of the concepts. Please take Professional advice in case you have any doubts.
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