According to the Income Tax Act’s definition, a “gift” can be money or movable or immovable property that an individual receives from another individual or organization without making a payment. The term “donor” refers to the individual or organization making the gift, while “donee” refers to the recipient.

 

Gifts, on the other hand, can frequently be used as part of tax planning or evasion. Tax evasion is illegal and punishable, but tax planning done in accordance with the law is allowed.

 

The Public authority presented a gift charge in April 1958 directed by Gift Expense Act, 1958 (GTA) with a goal to force charges on giving and getting gifts under specific explicit conditions. Gifts as money, request draft, bank checks, or anything having esteem were covered.

 

However, in October 1998, the Gift Tax Act (GTA) was repealed, making all gifts tax-free. However, in 2004, GTA was included in the income tax provisions in a new form. To avoid any erroneous or unplanned tax outflow, it is critical to have a basic understanding of India’s gift taxation.

gift taxation in India

as per the law, as it stands today which was amended in 2017, gifts received by any person by any person or persons are taxed in the hands of the recipient under the head ‘Income from other sources’ at normal tax rates. We have discussed below what kind of gifts are covered and their quantum to be taxed.

The provisions relating to gift tax have been dealt with under Section 56(2)(x) of the Income Tax Act, 1961. These provisions have been briefly captured in the form of the table below

Kind of gift covered	Monetary threshold	Quantum taxable
Any sum of money without consideration	Sum > 50,000	Entire sum of money received
Any immovable property such as land, building, etc. without consideration	Stamp duty value* > Rs 50,000	Stamp duty value of the property
Any immovable property for inadequate consideration	Stamp duty value* exceeds consideration by > Rs 50,000	Stamp duty value Minus consideration  Example 1:Stamp duty value Rs 2,00,000 Consideration Rs 75,000. The taxable amount is Rs 1.25 lakh (stamp duty value exceeds consideration by > Rs 50,000)   Example 2 In Example 1, if consideration  is Rs 1,60,000, the taxable gift is Nil as stamp duty value does not exceed consideration by > Rs 50,000
Any property (jewellery, shares, drawings, etc.) other than an immovable property without consideration	Fair market value *(FMV) > Rs 50,000	FMV of such property
Any property other than immovable property for a consideration	FMV exceeds consideration by > Rs 50,000	FMV Minus consideration (Same example in case of immovable property can be referred)

 

Value adopted by stamp duty authority for the purpose of stamp duty

Provisions relating to Stamp Duty

Arrangements connecting with considering the stamp obligation esteem is like the arrangements according to Segment 50C. Allow us to talk about the arrangement with the end goal of gift charge in a word underneath:

 

In the case of immovable property, the stamp duty value must be taken into account when calculating gift tax. Nonetheless, stamp obligation worth can be higher because of differed reasons and one of such reasons can be an impressive delay between understanding fixing the thought and date of enlistment. Therefore, if the following conditions are met, the stamp duty value as of the date of agreement determining the consideration must be taken into consideration for the purposes of the gift tax:

The registration date and this agreement’s date differ; The tax officer is required to refer the valuation to a valuation officer (VO) in the event that the taxpayer has questioned or disputed the stamp duty value adopted by stamp duty valuation authority in accordance with Section 50C. The VO is required to call for records, provide the taxpayer with an opportunity to be heard, and pass an order in writing of value he has arrived at. and Consideration is paid in full or in part by way of an account payee cheque, bank draft, or by using an electronic mode of transfer through A lower stamp duty value or VO value must be adopted for the purposes of the gift tax.

 

Exemptions from gift tax under section 56(2)x

As referenced over, certain predetermined presents got by any individual from any person(s) draw in gift charge. There are, however, a few exceptions to this rule.

 

Category of donee (recipient of gift)	Category of donor	Occasion covered
Individual (It may be relevant to note here that while a gift from a defined relative is not taxable for the donee, income from such gifts may in some cases taxable in the hands of the donor itself – For example, clubbing provisions, deemed owner concept in the house property, etc)	Relative – spouse, brother and sister of self and spouse, brother or sister of parents or parents-in-law, any lineal ascendant or descendant of self or spouse, spouse of any of the relatives mentioned here.	NA
Individual	Any person	Marriage of Individual
Any person	Any person	Under a will or by way of inheritance
Any person	Individual	In contemplation of death of donor or payer
Any person	Local authority – Panchayat, Municipality, Municipal Committee and District Board, Cantonment Board	NA
Any person	from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to Section 10(23C)	NA
Any person	Any charitable or religious trust registered under section 12A or section 12AA	NA
Any fund or trust or institution or any university or other educational institution or any hospital or other medical institution established for charitable/religious/educational /philanthropic purpose and approved by the prescribed authority. [Refer Section 10(23C) (iv) (v) (vi) and (via)]	Any person	NA
Members of HUF	HUF	Any distribution of capital assets on total or partial partition of a HUF
Trust created or established solely for the benefit of the relative of the Individual	Individual	NA

 

A word of caution: Gifts generally fall under the scrutiny of the tax department in India due to extensive gift tax planning, particularly if they are substantial. Consequently, it could be prudent to keep up with documentation to lay out the validity of the present got and adequate wellspring of assets with the giver to legitimize the gift.