FAQ on Income Tax Liability of Your Gift Items

FAQ on Income Tax Liability of Your Gift ItemsOn my marriage I have received gift valuing up to Rs. 8, 00,000 from my friends and relative. It’s very difficult to differentiate who paid what. Can you please tell me whether the entire amount will be taxable as a gift? If not the entire amount then let me know how much will be treated as gift?

Section 56 (2) of IT act specifically excluded certain gift items out of chargeability of tax. Gift received during a marriage also one of such item specified in the exempted list of the above section.

According to the provision, any gift received during your marriage will not be charged. If you have received any gift during your engagement then that will chargeable under IT act, as it is not excluded from section 56 (2). So if you have received your entire gift from your marriage then the entire amount is tax free.  

During the financial year my friend has gifted his motor car to me as he moved to USA for his onsite assignment. I came to know that the movable property acquired without consideration will be treated as a gift and will be charged in my hand. Please let me know if I need to pay income tax on this gifted motor car.

Movable property transferred without consideration to any one being an individual or Hindu undivided family will be treated as a gift and income tax has to be charged on such gift items. However the definition of Movable property does not cover a Motor Car. As such if any one transferred a motor car without consideration then such item will not be treated as gift. In your case you will not be liable to income tax.

My friend has transferred a rural agricultural land situated at my home village to me. The value of such land is Rs. 1, 00,000. Will be treated as gift under IT act?

According to IT Act, Rural agricultural land is not a capital asset and as such any transfer of such land will not be covered under IT Act to treat it as a gift.

In your case, you will not be liable and the entire amount you received is tax free.

What are the assets covered under section 56 (2) to be treated as a gift if transferred to someone without consideration?

Following assets if transferred without consideration to an individual or Hindu Undivided Family will be treated as a gift under section 56 (2) of IT act;

  1. Any Cash or Cheque or Draft;
  2. land or building or both;
  3. Shares and Securities;
  4. Gold coins or jewellary;
  5. Archaeological collection;
  6. Drawings;
  7. Painting;
  8. Sculptures;
  9. Any work of Art
  10. Bullion

I have received a painting of Rs. 30, 000, shares of a listed company valued Rs, 20, 000 and ornaments of Rs. 15, 000. None of the individual items are more than Rs. 50, 000 during the financial year. Will I be charged under IT act for these gift items?

Income tax will be charged if you as an individual or Hindu undivided family receives gift during the financial year in aggregate exceeding Rs. 50, 000. In your case the total gift received is Rs.  65, 000 as such the entire amount will be treated as gift during the financial year. As you have not mentioned from whom you have received these gifts we are assuming that you have not received these gifts from your relative. If such gifts are received from your relative then the entire amount will be exempted.

I heard, if I receive gift from my relative then nothing will be taxable even though the gift items are in excess of Rs. 50, 000. Can you please let me know how relative is defined under IT act for the purpose of gift?

According to section 56 (2) of IT act any gift received from your relative will not be charged to income tax.

For the above purpose relative means-

  1. Spouse of 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 descendant of the individual
  6. Any lineal ascendant or descendant of the spouse of the individual
  7. Spouse of the person referred in point number 2 to 6 above

Provisions of Section 56 (2) of IT Act for the Purpose of Gift

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