Income Tax: FAQ on Gift received by an Individual and HUF

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Income Tax: FAQ on Gift received by an Individual and HUF

 

 

Are monetary gifts received by an individual or Hindu Undivided Family (HUF) taxable?

If the following conditions are satisfied then any sum of money received (i.e, monetary gift may be received in cash, cheque, draft, etc.) by an individual/ HUF will be charged to tax (*):

  • Sum of money received without consideration.
  • The aggregate value of such sum of money received during the year exceeds Rs. 50,000.

(*) Refer next FAQ for situations in which sum of money received by an individual or HUF is not charged to tax, i.e., monetary gift is not charged to tax.

  • Are there any cases in which sum of money received without consideration, i.e., monetary gift received by an individual or HUF is not charged to tax?

If any sum of money is received on or after 01/10/2009 by an Individual or HUF without any consideration and the aggregate value of which exceeds Rs. 50,000 during the previous year, then the whole of the aggregate value of such sum is chargeable to tax.

However, in the following cases nothing will be charged to tax in respect of any sum of money received by an Individual or HUF without any consideration, if the same is received:

  • from any relative or by a HUF from its members; or
  • on the occasion of the marriage of the individual; or
  • under a will/ by way of inheritance; or
  • in contemplation of death of the payer or donor as the case may be; or
  • from a local authority as defined under Explanation to clause (20) of section 10 of the Income-tax Act, 1961; or
  • from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in  section 10 or
  • by any fund, trust, institution, any university, other educational institution, any hospital, other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10; or  (applicable if the money is received on or after 1st day of April, 2017)
  • from or by a trust or institution registered under  section 12AA section 12AB; or
  • from or by a trust or institution registered under section 12A; or  (applicable if the money is received on or after 1st day of April, 2017)
  • by way of transaction not regarded as transfer under section 47(i)/(iv)/(v)/(vi)/(via)/ (viaa)/(vib)/ (vic)/ (vica)/ (vicb)/ (vid)/ (vii)
  • from an Individual by a trust created or established solely for the benefit of relative of the Individual.  (applicable if the money is received on or after 1st day of April, 2017)
  • from such class of person’s and subject to such conditions as may be prescribed.
  • Gift received from relatives are exempt from tax. Who will be considered as relative for the purpose of claiming such exemption?

Gift received from relatives are exempt from tax.  by virtue of Section 56. Following persons would be considered as relative

(a) Spouse of the individual;

(b) Brother or sister of the individual;

(c) Brother or sister of the spouse of the individual;

(d) Brother or sister of either of the parents of the individual;

(e) Any lineal ascendant or descendent of the individual;

(f) Any lineal ascendant or descendent of the spouse of the individual;

(g) Spouse of the persons referred to in (b) to (f).

  • Apart from marriage are there any other occasions in which monetary gift received by an individual will not be charged to tax?

Gift received only on the occasion of marriage of the individual is not charged to tax. Apart from marriage there is no other occasion in which gift received by an individual is not charged to tax. Hence, gift received on occasions like birthday, anniversary, etc. will be charged to tax.

  • Are monetary gifts received from friends liable to tax?

Gifts received from relatives (as defined in the previous FAQ) are not charged to tax.

Friend is not a relative as defined in the list and hence, gift received from friends will be charged to tax (if other criteria of taxing gift are satisfied).

  • Are monetary gifts received from abroad liable to tax?

If the aggregate value of monetary gift received during the year by an individual or HUF exceeds Rs. 50,000 and the gifts are not covered under the exceptions prescribed in the preceding FAQ, then gifts whether received from India or abroad will be charged to tax.

  • An Individual received different gifts (cash) from his friends, none of the gift exceeded Rs. 50,000 but the total of the gifts received during the year exceeded Rs. 50,000. What will be the tax treatment in such a case?

Sum of money received without consideration by an individual or HUF is chargeable to tax if the aggregate value of such sum received during the year exceeds Rs. 50,000.

The important point to be noted in this regard is the “aggregate value of such sum received during the year”. The taxability of the gift is determined on the basis of the aggregate value of gift received during the year and not on the basis of individual gift. Hence, if the aggregate value of gifts received during the year exceeds Rs. 50,000, then aggregate value of such gifts received during the year will be charged to tax.

  • If the aggregate value of gift received during the year by an individual or HUF exceeds Rs. 50,000, whether total amount of gift will be charged to tax or only the amount in excess of Rs. 50,000 will be charged to tax?

Sum of money received without consideration by an individual or HUF is charged to tax if the aggregate value of such sum received during the year exceeds Rs. 50,000. Once the aggregate value of monetary gift received during the year exceeds Rs. 50,000, then the aggregate value of gift received during the year will be charged to tax.

  • Are there any cases in which the value of immovable property received by an individual or HUF without consideration (i.e. by way of gift) is not charged to tax?

Stamp duty of immovable property is chargeable to tax, if immovable property is received by an Individual or HUF without any consideration and the stamp duty value exceeds Rs. 50000.

However, in the following cases nothing will be charged to tax in respect of immovable property received on or after 01/10/2009 without any consideration, even if the stamp duty value exceeds Rs. 50,000:

  • from any relative or by a HUF from its members; or
  • on the occasion of the marriage of the individual; or
  • under a will/ by way of inheritance; or
  • in contemplation of death of the payer or donor as the case may be; or
  • from a local authority as defined under Explanation to clause (20) of section 10 of the Income-tax Act, 1961; or
  • from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in  section 10(23C); or
  • by any fund, trust, institution, any university, other educational institution, any hospital, other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10; or  (applicable if the property is received on or after 1st day of April, 2017)
  • from or by a trust or institution registered under  section 12AAsection 12AB ; or
  • from or by a trust or institution registered under section 12A ; or  (applicable if the property is received on or after 1st day of April, 2017)
  • by way of transaction not regarded as transfer:   (applicable if the property is received on or after 1st day of April, 2017)
  1. property received by way of distribution at the time of total or partial partition of HUF [sec. 47(i)]
  2. property received by an Indian subsidiary company, if the parent company or its nominees hold the whole of the share capital of the subsidiary company [sec. 47(iv)]   (Inserted by Finance Act, 2018 i.e. w.e.f 01.04.2018)
  3. property received by an Indian holding company, if the whole of the share capital of the subsidiary company is held by the holding company [sec. 47(v)]  (Inserted by Finance Act, 2018 i.e. w.e.f 01.04.2018)
  4. property received by amalgamated company from amalgamating company in the scheme of amalgamation, if amalgamated company is an Indian company. [sec. 47(vi)]
  5. property received by resulting company from demerged company in the scheme of demerger, if resulting company is an Indian company. [sec. 47(vib)]
  6. property received by a banking institution from banking company in a scheme of amalgamation of a banking company with a banking institution sanctioned and brought into force by the Central Government under sub-section (7) of section 45 of the Banking Regulation Act, 1949 (10 of 1949)  [sec. 47(viaa)]
  7. property received by successor co-operative bank from predecessor co-operative bank in a business reorganisation.  [sec. 47(vica)]
  8. from an Individual by a trust created or established solely for the benefit of relative of the Individual.  (applicable if the property is received on or after 1stday of April, 2017)
  9. from such class of persons and subject to such conditions, as may be prescribed.
  • An individual received gift of three properties from his friend. The value of none of the property exceeded Rs. 50,000, but the aggregate value of these three properties exceeded Rs. 50,000. What will be the tax treatment of gift in this case?

In case of immovable property received without consideration by an individual or HUF, the limit of Rs. 50,000 is to be applied transaction-wise and all immovable properties received as gift during the year are not to be clubbed for applying the limit of Rs. 50,000. Hence, if the total stamp value of immovable properties received as gift during the year exceeds Rs. 50,000 but the stamp value of none of the property exceeds Rs. 50,000, then nothing will be charged to tax.

  • Are immovable properties received as gift from friends liable to tax?

Gifts received from relatives are not charged to tax. Relative for this purpose means:

(a) Spouse of the individual;

(b) Brother or sister of the individual;

(c) Brother or sister of the spouse of the individual;

(d) Brother or sister of either of the parents of the individual;

(e) Any lineal ascendant or descendent of the individual;

(f) Any lineal ascendant or descendent of the spouse of the individual;

(g) Spouse of the persons referred to in (b) to (f).

Friend is not a relative as defined in the above list and hence, gift received from friends will be charged to tax (if other criteria of taxing gift are satisfied).

  • An Individual received gift of a flat from his friend. The stamp duty value of the flat is Rs. 84,000. In this case whether the total value of gifted property will be charged to tax or only the value in excess of Rs. 50,000 will be charged to tax?

If the conditions discussed in earlier FAQ (regarding the taxability of gift of immovable property) are satisfied, then the entire value of immovable property received without consideration, i.e., received as gift will be charged to tax. Once the taxability is attracted, i.e., value of property received as gift exceeds Rs. 50,000 then the entire value of the property is chargeable to tax. Hence, in this case entire value of property, i.e., Rs. 84,000 will be charged to tax.

  • Would any taxability arise if an immovable property is received for less than its stamp duty value?

If an Individual or HUF receives (on or after 1st day of October, 2009 but before April 1, 2017) and any person receives (After April 1, 2017), in any previous year from any person or persons any immovable property(being land or building or both):

  • without consideration, the stamp duty value of which exceeds Rs. 50,000 then the stamp duty value shall be chargeable to tax.
  • for a consideration, if stamp duty value exceeds the amount of consideration and the difference between stamp duty value and consideration is more than Rs. 50,000, then such difference is chargeable to tax. (applicable from A.Y 2014-15 to A.Y 2018-19).
  • for a consideration, if stamp duty value exceeds 110% of the amount of consideration and the difference between stamp duty value and consideration is more than Rs. 50,000, then such difference is chargeable to tax.

Provided that where the date of an agreement and date of registration are not same, Stamp Duty will be considered as applicable on the date of agreement. This will be applicable only when the amount of consideration is received by account-payee cheque or bank draft or online transfer or through such other electronic mode as my be precribed before the date of agreement.

Provided that if the stamp duty value of immovable property is disputed by the assessee on grounds mentioned in sub-section (2) of section 50C, the Assessing officer may refer the valuation of such property to a Valuation Officer, and the provisions of section 50C and sub-section (15) of section 155 shall apply in relation to stamp duty value of such property as they apply for valuation of a capital asset under those sections.

 To boost the demand in the real-estate sector and to enable the real-estate developers to sell their unsold inventory at a lower rate, the safe harbour limit is increased from existing 10% to 20% in case of transfer of residential property during the period from 12-11-2020 to 30-06-2021 by way of the first-time allotment to any person. Further, the consideration received or accruing as a result of such transfer should not exceed Rs. 2 crores

  • Are gifts of movable property received by an individual or HUF charged to tax?
  • Are there any cases in which the value of prescribed movable property received without consideration, i.e., received as gift by an individual or HUF is not charged to tax?

If the conditions given in preceding FAQ are satisfied, then value of prescribed movable property received without consideration, i.e., received as gift by an individual or HUF is charged to tax. However, in the following cases nothing will be charged to tax in respect of prescribed movable property received without consideration:

  • Property received from relatives.
  • Property received by a HUF from its members.
  • Property received on the occasion of the marriage of the individual.
  • Property received under will/ by way of inheritance.
  • Property received in contemplation of death of the donor.
  • Property received from a local authority as defined under section 10(20) of the Income-tax Act).
  • Property received from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in section 10(23C).
  • Property received from or by a trust or institution registered under section 12AA or section 12A.
  • Any shares received by an individual or HUF, as a consequence of business re-organisation of co-operative bank or demerger or amalgamation of a company [as referred to in clause (vicb) or clause (vid) or clause (vii) of Section 47]
  • from an induvidual by a trust created or established solely for the benefit of relative of individual.
  • from such class of persons and subject to conditions as my be prescribed.
  • An individual received gift of jewellery from his friends. The total value of jewellery received during the year as gift from all the friends amounted to Rs. 84,000. What will be the tax treatment of gift in this case?

If the aggregate fair market value of prescribed movable property received by an individual or HUF without consideration during the year exceeds Rs. 50,000, then the total value of such properties received during the year without consideration will be charged to tax. In this case the total value of jewellery received during the year exceeds Rs. 50,000 and hence, Rs. 84,000 will be charged to tax.

  • Does any taxability arise if prescribed movable property is received by an individual or HUF for less than its fair market value?

If the following conditions are satisfied then prescribed movable property (*) received by an individual or HUF will be charged to tax ($):

  • Prescribed movable property is acquired by an individual or HUF.
  • The aggregate fair market value of such properties acquired by the taxpayer during the year exceeds the consideration of these properties by more than Rs. 50,000. In other words, the aggregate fair market value of all such properties is higher than the consideration and the difference is more than Rs. 50,000.

(*) Prescribed movable property means shares/securities, jewellery, archaeological collections, drawings, paintings, sculptures or any work of art and bullion, being capital asset of the taxpayer.

Considering the above definition, nothing will be charged to tax if any movable property (other than those covered in the above definition) is received for less than its fair market value e.g., Nothing will be charged to tax in respect of a television set received for less than its fair market value because a television set is not covered in the definition of prescribed movable property.

($) Refer next FAQ for situations in which prescribed movable property received for less than its fair market value is not charged to tax.

  • Are there any cases in which prescribed movable property received for less than its fair market value by an individual or HUF is not charged to tax?

If the conditions given in preceding FAQ are satisfied, then prescribed movable property received (i.e. acquired) by an individual or HUF for less than its fair market value is chargeable to tax. However, in the following cases nothing will be charged to tax in respect of prescribed movable property received for less than its fair market value:

  • Property received from relatives (*).
  • Property received by a HUF from its members.
  • Property received on the occasion of the marriage of the individual.
  • Property received under will/ by way of inheritance.
  • Property received in contemplation of death of the donor.
  • Property received from a local authority as defined under section 10(20) of the Income-tax Act.
  • Property received from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in section 10(23C).
  • Property received from a trust or institution registered under section 12AAsection 12AB or section 12A.
  • by way of transaction not regarded as transfer under section 47(i)/(iv)/(v)/(vi)/(via)/ (viaa)/(vib)/ (vic)/ (vica)/ (vicb)/ (vid)/ (vii).
  • from an individual by a trust created or established solely for the benefit of relative of the individual.
  • From such persons and subject to such conditions as may be prescribed.

(*) Relative for this purpose means:

(a) Spouse of the individual;

(b) Brother or sister of the individual;

(c) Brother or sister of the spouse of the individual;

(d) Brother or sister of either of the parents of the individual;

(e) Any lineal ascendant or descendent of the individual;

(f) Any lineal ascendant or descendent of the spouse of the individual;

(g) Spouse of the persons referred to in (b) to (f).

 


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1 Comment

  1. May 27, 2021
    Ravikant Gandhi

    Any gift received by mother from her married doughter is taxable. ?. The aggregate value during year rs. 60000/-

    Reply

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