Taxation Of Gifts Received By An Individual

Taxation of gifts :

Indians have a custom of gifting people things, whether it by on an occasion, festival or otherwise. The Taxation of gifts is a very important section, whether the gift is in cash(monetary gift ) or otherwise. As per income tax act. Taxation of gifts received are in the hands of recipient under the head of other Sources. There is no there is no Taxation of gifts for the donor.

In case of an individual or Hindu Undivided Family (HUF),

If the following conditions are satisfied then any sum of money received without consideration (i.e., monetary gift may be received in cash, cheque, draft, etc.) by the individual/ HUF will be charged to tax, normally under the head of " Income from other sources":

1. Sum of money received without consideration.
2. The aggregate value of such sum of money received during the year exceeds Rs. 50,000.

That is, a sum of monetary gift that exceeds Rs 50,000 will be taxable. This is subject to the following exemptions that are fully exempt from paying tax:

• Money received from relatives.

Relative for this purpose means:

1. In case of an Individual

• Spouse of the individual;
• Brother or sister of the individual;
• Brother or sister of the spouse of the individual; [As amended by Finance Act, 2018]
• Brother or sister of either of the parents of the individual;
• Any lineal ascendant or descendent of the individual;
• Any lineal ascendant or descendent of the spouse of the individual;
• Spouse of the persons referred to in (b) to (f).

Any sum of money received from the above persons as a gift will be exempted from tax. Monetary gifts received from friends or any other persons other than the above mentioned, will be charged to tax if it exceeds Rs50,000.

2. In case of HUF :

• Money received on the occasion of the marriage of the individual.
• Money received under will/ by way of inheritance.
• Money received in contemplation of death of the payer or donor.
• Money received from a local authority [as defined in Explanation to section 10(20) of the Income-tax Act].
• Money received from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or other specified institution
• Money received from a trust or institution registered under section 12AA.
• Share received as consequences of demerger or amalgamation of a company.
• Share received as a consequences of business reorganization of a co-operative bank under section 47

Immovable property (being land or building or both, is received by an individual/HUF.) received by an individual or HUF without consideration (i.e. by way of gift) is not charged to tax, if received from the relatives and ways mentioned above.

• Taxation of gifts in the event of marriage

Gifts received by an individual in the occasion of his marriage, is fully exempted form paying tax.

• Taxation of gifts received from any local authority

Panchayat, Municipality, Municipal Committee and District Board, Cantonment Board and from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution or any charitable or religious trust is fully exempt from tax.

Tax treatment of immovable property received as gift by an individual or HUF :

If the following conditions are satisfied than immovable property received without consideration by an individual or HUF will be charged to tax:

1. Immovable property, being land or building or both, is received by an individual/HUF.
2. The immovable property is a capital asset with in the meaning of section 2(14) for such an individual or HUF.
3. The stamp duty value of such immovable property received without consideration exceeds Rs. 50,000.

When immovable property received by an individual or HUF without consideration (i.e. by way of gift) is exempted from tax in the following cases.

In following cases, gift of immovable property will not be charged to tax.

• Property received from relatives.

Relative for this purpose means:

In case of an Individual :

1. Spouse of the individual;
2. Brother or sister of the individual;
3. Brother or sister of the spouse of the individual;
4. Brother or sister of either of the parents of the individual;
5. Any lineal ascendant or descendent of the individual;
6. Any lineal ascendant or descendent of the spouse of the individual;
7. Spouse of the persons referred to in (b) to (f).

In case of HUF, any member thereof..

• Property received on the occasion of the marriage of the individual.
• Property received under will/ by way of inheritance.
• Property received in contemplation of death of the donor.
• Property received from a local
• Property received from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or other specified institution
• Property received from a trust or institution registered under section 12AA.