Friends,
When a gift or a specified property is received without consideration from a non-relative whether in cash or in kind or any property is purchased for an inadequate consideration it shall be treated as income from other sources and taxable in the hand of the recipient under the new provisions for gift. In this article we will discuss about the new provisions regarding gift tax treatment w.e.f. 1-10-2009. You can also differentiate with old provisions after reading below articles on gift tax treatment.
Relative Means
- Spouse of the individual
- Brother or sister
- Brother or sister of the spouse
- Brother or sister of either of the parents of the individual
- Any lineal ascendants or descendant of the individual
- And lineal ascendant or descendant of the spouse
- Spouse of the person referred to in (2) to (6)
Amount of Gift
Where an amount Rs.50000 (Gift in case or by cheque or draft) in aggregate in any previous year is received by an individual or HUF without any consideration the aggregate sum shall be deemed to be the income of the recipient.
Immovable property without any consideration
If any immovable property without any consideration is received and the stamp duty value of which exceeds Rs. 50,000, stamp duty value will be chargeable to tax.
Immovable property for a consideration which is less than the stamp duty value
If any immovable property is received for a consideration which is less than the stamp duty value of the property by an amount exceeding Rs.50,000, then the difference between stamp duty value and consideration is chargeable to tax.
Example: Mr. X purchase plot for Rs. 10 lakh from his friend (Stamp Duty Value: 10.50 lakh) on Oct, 20, 2009. Mr X purchase another property for Rs. 15 lakh from his friend (Stamp duty Value : 15.50 lakh on Nov 15, 2009.
Solution: No tax is levied in the hands of Mr. X. Whether the difference is Rs. 1 lakh, but we will not consider it as whole/aggregate. “
Important Note: Single transaction would be applicable for the ceiling limit of Rs.50,000 opposite in the case of movable property where we consider aggregate amount”
Movable property without consideration
If aggregate fair market value of movable properties received without consideration during a previous year exceeds RS. 50,000, the whole of aggregate fair market value of movable property will be chargeable to tax.
Movable property for a consideration which is less than fair market value
If movable property is received for a consideration which is less than the aggregate fair market value of the property by an amount exceeding Rs. 50,000, then the difference between aggregate fair market value and the consideration is chargeable to tax.
Example: Mr X purchased gold for Rs. 1 lakh from his friend (fair market value was Rs. 1.60 lakh) on Oct 15, 2009. He purchased another item painting for Rs. 4 lakh from his friend which fair market value was Rs. 4.70 lakh on Nov 5, 2009.
Solution: Mr x has paid aggregate consideration Rs. 5 lakh, aggregate fair market value was 6.30 lakh. So the difference is taxable in the hand of Mr X i.e (Rs. 1.30 Lakh)”
Important note: Recipient can take the benefit of “tax paid” by increasing the cost of property (cost of acquisition u/s 49) , while computing the capital gain tax on sale of that gifted property.
Important Note: Please consider word aggregate means in all transaction
Exempted Situations
In the following situation, the gift will be not taxable and treated as exempted.
- Property or Money received on the occasion of the marriage of the individual.
- Property or Money by way of will/inheritance.
- Property of Money in contemplation of death of the payer.
- Property of Money received from a local authority.
- Property of Money received from any fund, foundation, university, other educational institution, hospital, medial institution, any trust or institution referred to in section 10(23C).
- Property or Money from a charitable institute registered under section 12AA.
List of properties
- Immovable property being land or building
- Shares and Securities
- Jewellery
- Arc Collection
- Drawings
- Paintings
- Sculptures
- Any work or art
Resident or Non-Resident Situations
- All provision are applicable same for resident or non-resident donor
- Non-Resident in India is also chargeable to tax if receive gifts in India.
- Recipient status does not matter whether resident or non-resident, above provision will be applicable.
