Tax on Gifts in India

Types of Income Tax Gifts

The following is the list of income tax gifts:

Monetary Gifts

1. Include all forms of money received, such as cash, cheques, drafts, and bank transfers.

1. Any amount may qualify as a taxable gift received through the above-mentioned modes.

Movable Property Gifts

1. Cover tangible, portable items, such as jewellery, shares, bonds, paintings, sculptures, and other valuable assets.

1. When movable property is received for a price lower than its fair market value, the difference is considered a gift.

1. Example: If you receive a painting at a price significantly below its true market value, the gap between the market value and the amount paid is treated as a gift.

Immovable Property Gifts

1. These types of gifts include land, buildings, and residential or commercial real estate.

1. If such property is received at a price less than its stamp duty value, the difference is treated as a taxable gift.

Exemptions on Gift Tax

Under Indian income tax law, not all gifts are taxable. While gifts exceeding Rs.50,000 in value are generally taxed, several specific exemptions are provided depending on the nature of the gift, the relationship between the donor and recipient, and the occasion on which the gift is given.

1. Gifts Up to Rs.50,000: If the total value of gifts received during a financial year does not exceed Rs.50,000, then the amount is fully exempt from tax.

1. Property Received for Inadequate Consideration: the difference between the stamp duty value and the amount paid is treated as a taxable gift, when property is received for a price lower than its fair market value. This difference is exempt if it is less than Rs.50,000.

1. Gifts from Relatives (Fully Exempt): Gifts from specified relatives are not taxable. These include:

1. Spouse

1. Siblings of the individual

1. Siblings of the spouse

1. Siblings of either parent

1. Lineal ascendants or descendants of the individual

1. Lineal ascendants or descendants of the spouse

1. Spouses of all the relatives listed above

Note: Income generated from such gifted assets (e.g., interest, rent) may be taxable under clubbing provisions.

1. Wedding Gifts: Gifts received by an individual on the occasion of marriage—whether in the form of cash, jewelry, gold, property, or securities, are fully exempt from tax.

1. Gifts by Inheritance or Will: Any assets or money will not be considered under gift tax if it is received through inheritance or under a will.

1. Gifts from Local Authorities or Charitable Organisations: Amounts received from local authorities, charitable trusts, foundations, universities, or registered charitable institutions are generally tax-exempt. This includes financial assistance provided to meritorious students or individuals undergoing medical treatment.

1. Money Received in Contemplation of Death: Amounts received from a person in anticipation of their death are exempt from income tax, and it is similar to inheritances.

Gifts Received from Exempt Institutions:

Final Summary Table

Taxable Value of a Gift

Here is the list of taxable value of various monetary and non-monetary presents:

How to Declare Gift Tax in India?

Gift tax in India is a direct tax charged to the gift recipient, who must report the value of taxable gifts in their Income Tax Return (ITR). The process involves assessing the gift’s value, declaring it correctly, and paying the applicable tax.

1. Determine the Taxable Value: After accounting for any eligible exemptions or deductions, calculate the taxable amount of the gift.

1. Report in the ITR: While filing your income tax return, declare the taxable value under the “Income from Other Sources” section.

1. Compute Total Tax Liability: First add the taxable gift value to your overall income for that financial year. Next, to determine the payable tax amount, apply the income tax slab rate applicable to you.

1. Pay the Tax: Along with your regular income tax obligations; make payment of the gift tax amount calculated.

Provisions Relating to Stamp Duty

The stamp duty value plays a key role in calculating gift tax on immovable property. Similar to Section 50C, this value is used to determine the taxable amount when a property is gifted.

Stamp Duty Value on Agreement Date: Stamp duty may sometimes appear higher due to factors, such as delays between agreement and registration.

When the agreement date and registration date differ, the stamp duty value as on the agreement date can be used for gift tax calculations, depending on the following factors:

1. The agreement and registration dates are not the same.

1. Part or full payment is made through an account payee cheque, bank draft, or electronic transfer on or before the agreement date.

Disputing Stamp Duty Value: If the taxpayer challenges the value adopted by the stamp duty authority:

1. The tax officer must refer the matter to a Valuation Officer (VO).

1. The VO allows the taxpayer to present their case after examining the records and issues a written valuation order.

1. The lower value determined by the VO may be considered for gift tax purposes.

Relaxation under Section 56(2)(x):

A tolerance limit of up to 10% of the consideration is allowed if the stamp duty value exceeds the consideration received for the gifted property. The excess amount within this limit will not be treated as income from other sources.