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India as a country follows the joint family structure system and has so many festivals to be celebrated owing to the diverse religions, customs and cultures. There are numbers of occasions in which the gifts are exchanged between the families. In fact, gifting each other signifies affection and love between the families and with that is also symbolized as the social status.
However, numerous of times gifts can also be an integral part of tax evasion/ tax planning. While tax evasion is prohibited and can attract penal provision, tax planning is completely legal and can be done under the framework of the law.
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The government of India has introduced Gift Tax in April, which is regulated by the Gift Tax Act, 1958 (GTA). The main aim of the government to implement this law is to impose a tax on receiving and giving gifts under various circumstances. All the gifts in a form of blank cheques, demand draft, cash, or anything are covered under the act. However, the gift tax was abolished in October 1998 and all tax on the gift was nil. Provided that the tax on the gift was reintroduced in a new form and also included in the provisions under the Income Tax Act in 2004.
It is very important to have a basic understanding of the taxation on gifts in India to dodge any unplanned/ ignorant tax outflows.
As per the present law, which was amended in the year 2017, any gift received by any persons taxed in the hand of the receiver comes under the category of ‘Income from other sources’ at normal tax rates. There are a number of gifts that come under the ambit of taxation.
According to the income tax act, gift includes:
Cash as Gift
If the total value of the gift is less than Rs. 50,000 than nothing will be taxable. If value surpasses the limit of Rs. 50,000, the whole amount will be taxable
Movable property as Gift
In this case, where an individual receives, in any previous financial year, from any person, any property without any consideration, the total market price of which surpasses the 50,000 rupees, the whole market value of the property will be taxable by the receiver.
In this case, where an individual receives, in any previous financial year, from any person, any property for a consideration, the total market price of which surpasses the amount of Rs. 50,000/-, the whole market value of the property exceeds such consideration.
Immovable property as Gift
In this case, where an individual receives, in any previous financial year, from any person, any immovable property without consideration and the stamp duty surpasses Rs 50,000 then the value of stamp duty of such property will be taxable in the hands of the receiver.
In this case, where an individual receives, in any previous financial year, from any person, any property for a consideration, the total value of stamp duty surpasses such consideration, if the amount of the excess is more than the higher of the following amounts:
The surplus differential amount will be taxable in the hands of the receiver.
If the gifts are received in the following conditions then it will be exempted:
In the situation where property or the sum of money received:
In the above mentioned points the relative mean:
Read our article:Claim Income Tax Refund Online
Rajdeep is a law graduate from Guru Gobind Singh Indraprastha University. During his law school he gained vast experience in corporate and commercial law. He likes traveling and performing stand-up comedy.
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