Taxability in the hands of recipient for receiving any sum of money or property without or inadequate consideration.

Taxability in the hands of recipient for receiving any sum of money or property without or inadequate consideration.

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Taxability in the hands of recipient for receiving any sum of money or property without or inadequate consideration.

Any sum of money or property received without consideration or for inadequate consideration is subject to tax under the head Income from other sources under section 56(2) (X) of Income Tax Act 1961 in the hands of recipient.

(1) Sum of money received without consideration in excess of Rs 50000 is subject to under section 56(2) (X).

(2) If movable property is received without consideration and the fair market value of property exceeds Rs 50000, than the fair market will be taxable as income in the hands of recipient.

(3) If consideration received for movable property is less than fair market value and the difference exceeds Rs 50000, than the difference is taxable.

(4) If an immovable property is received without consideration and the stamp duty value of property exceeds Rs 50000, than the stamp duty will be taxable as income in the hands of recipient.

(5) If consideration received for immovable property is less than stamp duty value and the difference exceeds Rs 50000, than the difference is taxable.

Non Applicability of section 56(2) (X) of Income Tax Act 1961

(a) Any property or sum of money received from relative

(b) Gift received on the occasion of marriage

(c) Any property or sum of money received under will or inheritance or in contemplation of death of payer.

(d) Any property or sum of money received from local authority, educational or medical institution

(e) Any property or sum of money received from an individual by a trust created or established solely for the benefit of relative of the individual.

Important definition for section 56(2) (X) of Income Tax Act 1961

“Relative”

1. Spouse of the 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 and of the spouse of the individual

6. Spouse of the person referred to in clauses (2) to (5).

7. In case of a Hindu undivided family, any member thereof

“Property” includes:

1. Land and building (immovable)

2. Shares and securities

3. Jewellery

4. Archaeological collection

5. Drawings

6. Paintings

7. Sculpture

8. Any work of art

 


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