Any sum of money received from relatives as a gift or under a will or by way of inheritance is fully exempt from tax in the hands of the beneficiary. However, the exempt gift amount needs to be disclosed under the schedule ‘Exempt Income’ in the ITR.
The Indian legislative system sought to levy tax on gifts in the hands of the donor by enacting the Gift Tax Act, 1958. This legislation was however abolished in 1998.
Six years later, the Finance Act 2004 introduced section 56(2)(v) for taxing gifts in the hands of the recipient. Accordingly, today gifts received by an individual or Hindu Undivided Families (HUFs) are taxed as under -
Gift of money: Aggregate value of cash gifts received without consideration during a financial year (FY) would be taxable as other income in the hands of the recipient. However, if the aggregate value of such gifts is less than Rs 50,000, then it would be exempt from tax.
Gift of immovable property: In case of gifting of immovable property (i.e., land or building), the recipient would be required to pay income tax if the stamp duty value of the property exceeds Rs 50,000 and such property is received without adequate consideration.
Any inadequate consideration received wherein the difference between the consideration and stamp duty value exceeds higher of Rs 50,000 and 5 percent of consideration, such difference shall be taxed in the hands of the recipient.
Taxation of gift from employer: The legislations have been penned so as to levy tax even if gifts are provided by an employer to employees. Such gifts are taxable in the hands of the employees as salary income provided the aggregate value in a year is Rs 5,000 or more.
Any sum of money received from relatives as a gift or under a will or by way of inheritance is fully exempt from tax in the hands of the beneficiary. However, the exempt gift amount needs to be disclosed under the schedule ‘Exempt Income’ in the ITR.
The Indian legislative system sought to levy tax on gifts in the hands of the donor by enacting the Gift Tax Act, 1958. This legislation was however abolished in 1998.
Six years later, the Finance Act 2004 introduced section 56(2)(v) for taxing gifts in the hands of the recipient. Accordingly, today gifts received by an individual or Hindu Undivided Families (HUFs) are taxed as under -
Gift of money: Aggregate value of cash gifts received without consideration during a financial year (FY) would be taxable as other income in the hands of the recipient. However, if the aggregate value of such gifts is less than Rs 50,000, then it would be exempt from tax.
Gift of immovable property: In case of gifting of immovable property (i.e., land or building), the recipient would be required to pay income tax if the stamp duty value of the property exceeds Rs 50,000 and such property is received without adequate consideration.
Any inadequate consideration received wherein the difference between the consideration and stamp duty value exceeds higher of Rs 50,000 and 5 percent of consideration, such difference shall be taxed in the hands of the recipient.
Taxation of gift from employer: The legislations have been penned so as to levy tax even if gifts are provided by an employer to employees. Such gifts are taxable in the hands of the employees as salary income provided the aggregate value in a year is Rs 5,000 or more.
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