gift is now taxable

Query 1]

Whether the property purchased after 01.10.2009 for a value less than the market value is taxable now in the hands of recipient? Is there any amendment in section 56(2) or so? Whether cash gift is taxable only or even the property gift is also taxable now? Please kindly elaborate the changes in section 56(2) by the Last Budget? [L.L]

Opinion:

EARLIER PROVISION:

Previously till 30.09.2009, as per section 56(2)(vi) of the Income Tax Act- 1961, the sum of money received without consideration only was taxable. Gift in kind was outside the taxable net.

AMENDED PROVISION:

In order to bring the receipts in kind in to the tax net, the Finance (No. 2) Act -2009 has carried out the following amendment effective from 01.10.2009: –

1. Scope of section 56(2)(vi), as mentioned above, has been restricted to the gift received before 01.10.2009.

2. A new clause (vii) has been inserted in sub-section 56 (2) so as to bring the following receipts within the tax net:

   i) Any sum of money exceeding Rs. 50,000/- in aggregate without consideration.

   ii) Any immoveable property received without consideration, if the stamp duty value of such property exceeds Rs. 50,000/-

   iii) Any immoveable property received for a consideration where such consideration is less than the stamp duty value of the property by an amount exceeding Rs. 50,000/-

   iv) Any property other than immoveable property received without consideration, if the fair market value of such property exceeds Rs. 50,000/-

   v) Any property other than immoveable property received for a consideration where such consideration is less than the fair market value of the property by an amount exceeding Rs. 50,000/-.

3. The new clause is applicable to the Individual and HUF only, as earlier.

4. Consequent to above amendment, a new sub-section (4) has been added to section 49 providing for adopting the value as referred to in b(ii) to b(v) as the cost of acquisition for computing of capital gain.

UNCHANGED PROVISION :

As earlier, new 56(2)vii) is not applicable in respect of gift received by an Individual/HUF
A) From Any relative; or
B) on the occasion of the marriage of the individual; or
C) Under a will or by way of inheritance; or
D) In contemplation of death of the payer; or
E) from specified local authorities; or
F) from prescribed university/ education insituition/ hospital etc
G) from any trust/institution registered u/s 12AA.

The definition of Relative has also remained unchanged so as to mean & include:

1. Spouse of the Individual
2. Brother or sister of individual

• Brother or sister of the spouse of the individual

1. also both of either of the parents of the individual
2. any lineal ascendant or descendant of the individual
3. any lineal ascendant or descendant of the spouse of the individual

• Spouse of the person referred to in clause (ii) to (vi).

With above, the reply to your query is as under:

1. In case of immoveable property, if the purchase price is less than the stamp duty valuation, the difference will be taxable as income.
2. Cash/cheque gift is taxable, same as earlier if not falling in any of the mode given in (A) to (G) above.
3. The gift in kind (like immoveable property, jewellery etc) is taxable now w.e.f. 01.10.2009 if not falling in any of the mode given in (A) to (G) above

Query 2]

I am a PSU Employee. My father owns a self acquired house property. He now wishes to sell the same to me. For purchase, I want to take a home loan. Will I be able to get the tax benefits on the EMI paid on the loan so availed for the said property? [J. N. Jain]

Opinion:

The principal repayment of the housing loan will be eligible for deduction under Section 80C in your hands. Similarly, the interest payable on the housing loan will qualify for deduction under Section 24(b). The mere fact that you purchased the property from your father will not be an impediment to your claim for deductions.

gift is now taxable

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