Any sum of money or property received without consideration after 1st October 2009 will be treated as gift and will be charged to income tax during the financial year in which it is received. The gift amount will be chargeable to income tax under the head income from other sources.
Who is Chargeable
An individual or a Hindu Undivided Family who receive the gift will be chargeable. The individual who has donated will not be taxable under IT act. It will be recovered from the person who receives the gift.
What type of gifts are covered
It has classified the money and property which can be gifted by an individual into 3 categories;
- Gift in Cash or by Cheque or by a demand draft
- Gift of Immovable property
- Gift of Movable property
If you have received any amount in excess of Rs. 50, 000 during the financial year in cash or by cheques or by a demand draft then such amount will be chargeable to Tax under the head “other sources”. It will be chargeable even if the amount received in cheques or demand draft.
If any immovable property is transferred without consideration and such immovable property’s stamp duty is in excess of Rs. 50, 000 then stamp duty value of such immovable property will be chargeable to tax. If you have paid any amount less than the stamp duty value in consideration of receiving the immovable property then nothing will be taxable in your hand even if the difference between the stamp duty value and consideration is more than Rs. 50, 000.
From the financial year ending 31st march 2014, if any immovable property received for a consideration which is less than the stamp duty value of the property by an amount exceeding Rs. 50, 000 then the difference between stamp duty value and consideration is chargeable.
Movable property will be taxable if such property is gifted without consideration or for a consideration less than the market value of movable property. If the fair market value of movable property received during the financial year as a gift exceeds Rs. 50, 000 in aggregate then the fair market value of the property will be chargeable. If you have paid a consideration that is less than fair market value of the movable property and such lesser amount is in excess of Rs. 50, 000 then the difference amount will be charged to tax.
Certain Gifts are exempted
If you have receive any gift from following categories then such gift will not be chargeable to income tax during the financial year;
- Gift received from your spouse, brothers or sisters, brothers or sisters of the spouse, brothers or sisters of your parents, bothers or sisters of your spouse’s parents, any lineal ascendant or descendent, any lineal ascendant or descendent of your spouse, any spouse of the above mentioned categories.
- Gift received on the occasion of your marriage
- Gift received by way of Will
- Gift received in contemplation of death of payer
- Gift received from any local authority
- Gift received from a university, educational institution, hospital, medical institution or any trust
- Gift received from a registered charitable institution
It does not matter whether gift is received by a resident or non resident or the donor is resident or non resident. In either case if all the other conditions of section 56 (2) of IT act satisfy then you may have to pay income tax on the gift that you received during the financial year.