Gift Taxation in India
Gift Taxation in India
Blog Article
Gift Taxation in India
In India, gifts are subject to tax under the Income Tax Act after the repeal of the Gift Tax Act in 1998. Although there is no specific gift tax, gifts exceeding a certain value are taxed as part of income. Gifts up to ₹50,000 annually are exempt from tax. Additionally, gifts from specific relatives, such as parents, spouses, and siblings, are exempt regardless of the amount. Let's delve into how gift taxation works in India.
What Qualifies as a Gift?
Under the Income Tax Act, a gift includes any money or movable/immovable property received without payment or consideration.
Types of Gifts:
- Monetary Gifts: This includes cash, cheques, bank drafts, and online transfers.
- Movable Property: Assets such as shares, bonds, jewelry, paintings, and sculptures fall into this category. It also includes property purchased below market value.
- Immovable Property: Land, buildings, or any real estate, including properties bought for less than their stamp duty value.
Tax-Exempt Gifts
- Gifts up to ₹50,000: Gifts totaling up to ₹50,000 annually are tax-free. However, if this limit is exceeded, the entire amount becomes taxable. For instance, if you receive ₹75,000 from a friend, the full ₹75,000 will be taxed as "Income from Other Sources."
- Property Bought at a Discount: If you acquire property (movable or immovable) for less than its market value, the difference between the market value and the purchase price will be taxed. For example, if you purchase a flat worth ₹50 lakhs for ₹30 lakhs, the ₹20 lakh difference is taxable.
- Gifts from Relatives: Gifts from specified relatives such as spouses, parents, siblings, and lineal ascendants or descendants are exempt from tax, regardless of value. However, any income generated from such gifts, like interest earned, is taxable under the clubbing provisions.
- Gifts on Marriage: Gifts received on your wedding day are entirely exempt from taxation, irrespective of the amount or type.
- Other Exemptions:
- Gifts received as part of a will, inheritance, or due to a person's death.
- Property received from local authorities, or certain institutions and trusts specified under the Income Tax Act.
How to Calculate Taxable Gifts
| Type of Gift | Tax Applicability | Taxable Value |
|---|---|---|
| Cash, cheque, bank transfer | If total value exceeds ₹50,000 | Full amount is taxable |
| Immovable property (received without payment) | If stamp duty value exceeds ₹50,000 | Stamp duty value is taxable |
| Immovable property (bought below market value) | If the difference between stamp duty and purchase price is over ₹50,000 | The difference is taxable |
| Movable assets (like shares, jewelry) without payment | If fair market value exceeds ₹50,000 | Fair market value is taxable |
| Movable assets (bought below market value) | If the fair market value exceeds the purchase price by ₹50,000 | The difference is taxable |
Declaring Gifts for Tax Purposes
Gifts must be reported as part of your income when filing your Income Tax Return (ITR) under the section "Income from Other Sources." Your tax liability will depend on your total income and the applicable tax slab.
Tax on Gifts from Friends
Gifts from friends are taxable if their value exceeds ₹50,000 in a year. Since friends are not classified as relatives for tax purposes, any gift, whether monetary or non-monetary, is taxed if it exceeds this threshold.
Tax on Gifts from Relatives
Gifts from specific relatives are fully exempt, irrespective of the amount. These relatives include:
- Spouse
- Parents
- Siblings (and their spouses)
- Lineal ascendants and descendants (e.g., grandparents, children)
- Members of a Hindu Undivided Family (HUF)
Tax on Gifts Received During Marriage
Gifts received on the occasion of your marriage, whether they are cash or property, are entirely tax-free. However, gifts received on other occasions like birthdays or anniversaries are taxable.
Report this page