Gifts

Are Gifts subject to tax in India?

Ans. As per provisions of the Act, any sum of money/ property which is received without consideration or for an inadequate consideration (in excess of Rs. 50,000/-) by any person shall be chargeable to tax in the hands of the recipient under the head ‘Income from Other Sources’ subject to gifts received from specified relatives (refer FAQ e. for meaning of relative) and other exceptions as specified in the below FAQs.

It may be of relevance to note that transfer of funds as Gift by Non-Resident to a Resident /Non-Resident and vice versa may attract taxes. Accordingly, a person should examine the taxability of such a transaction prior to entering the same.

What are the provisions under the Act with respect to taxation of Gifts?

Ans.

Gifts received from a Non-relative (refer FAQ e. for meaning of relative) are chargeable to tax in hands of the recipient in the following manner (subject to FAQ d.):
i. Money received in excess of Rs. 50,000/- shall be fully taxable.
ii. Immovable property being Land or Building or both received:
Without consideration shall be taxable at Stamp duty value, if it exceeds Rs. 50,000/-
For an inadequate consideration shall be taxable on the difference between the Stamp duty value and consideration received on such property, if the Stamp duty value exceeds actual consideration by higher of the following:
- Rs.50,000/-; and
- 5% of the consideration
iii. Movable property received:
Without consideration shall be taxable at the FMV, if it exceeds Rs.50,000/-
For an inadequate consideration shall be taxable on the difference between the FMV and the consideration received on such property, if the difference exceeds Rs. 50,000/-.

Stamp duty value as on which date should be considered for the purposes of complying with the provisions of the Act specified in FAQ b., point 2 and 3 above?

Ans.

Stamp duty value prevailing on the date of Registration of the property has to be considered. 

However, where the date of Agreement and Registration are not the same, Stamp duty value as on the date of Agreement may also be taken, if the amount of Sale consideration or part thereof, has been paid (through specified modes) on or before the date of Agreement. 

Are there any exceptions to the Gift provisions mentioned in FAQ b.?

Ans.

The provisions of Gifts shall not apply to any gift received:
i. from a relative (refer FAQ e. for meaning of relative); or
ii. on the occasion of marriage of the individual; or
iii. under a WILL or by way of inheritance; or
iv. in contemplation of death of the payer; or
v. from any local authority as specified in the Act; or
vi. from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution specified in the Act.

Definition of relative as per the provisions of the Act.

Ans.

i. In case of an Individual:
spouse of the individual;
brother or sister of the individual;
brother or sister of the spouse of the individual;
brother or sister of either of the parents of the individual;
any lineal ascendant or descendant of the individual;
any lineal ascendant or descendant of the spouse of the individual;
spouse of the person referred to in clauses (ii) to (vi);]
ii. In case of a HUF:

Any Member thereof

A NRI receives a Gift of Rs.1,00,000/- from his neighbour, who is on his death bed. Will this Gift be taxed in the hands of the NRI?

Ans. No. Since the Gift is received on contemplation of death of the neighbour, there will be no tax implication in the hands of NRI.

A NRI receives a Gift of Rs.1,00,000/- from his neighbour, who is on his death bed. Will this Gift be taxed in the hands of the NRI?

Ans. No. Since the Gift is received on contemplation of death of the neighbour, there will be no tax implication in the hands of NRI.

Case Study: NRI receives an immovable property from a Non-relative. Brief facts are as under: Date of Gift: June 25, 2018 Consideration paid by NRI: Rs. 25,20,000/- Stamp Duty Value: Rs. 27,00,000/- What shall be the tax treatment in the present case?

Ans.

If an individual receives an immovable property and Stamp duty value of such property exceeds actual consideration by higher of Rs.50,000/- and 5% of the actual consideration, then the excess of Stamp duty value over the purchase price shall be charged to tax under the head ‘Income from Other Sources’. 

In the present case, Stamp duty value exceeds the actual consideration by Rs.1,80,000/- which is higher than Rs. 50,000/- and 5% of the actual consideration of Rs. 25,20,000/- i.e. Rs. 1,26,000/-. Accordingly, the difference of Rs. 1,80,000/- (Rs. 27,00,000/- less Rs. 25,20,000/-) shall be treated as income of NRI.