Gifts

a. 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 by any person shall be chargeable to tax in the hands of the recipient subject to certain exceptions as specified in the below FAQs.

 

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

b. What is the meaning of the term property?

Ans.

Property has been defined to mean the following assets:

 

i.      Immovable Property being Land or Building or both

ii.     Property other than immovable property i.e. Movable Property being:

·         Shares and Securities

·         Jewellery

·         Bullion

·         Archaeological collection

·         Drawings

·         Paintings

·         Sculptures

·         Any work of art


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

Ans.

Gifts received from a person are chargeable to tax in the hands of recipient and the provisions relating to taxation of said gifts are tabulated below:

 

Kind of gift covered

Monetary threshold

Quantum taxable

i.    Any sum of money without consideration

Sum > Rs 50,000

Entire sum of money received

ii.   Any immovable property without consideration

Stamp Duty Value* >Rs 50,000

Stamp duty value of the property

iii.  Any immovable property for inadequate consideration

Difference between Stamp duty value and consideration,is higheroffollowing amounts:

·         Rs 50,000 and

·         10%** of consideration

Stamp duty value Minus Consideration

iv.  Any movable property without consideration

Fair market value (FMV)***> Rs 50,000

FMV of such property

v.   Any movable property for an inadequate consideration

FMV exceeds consideration by > Rs 50,000

FMV Minus Consideration

 

*Value adopted by stamp duty authority for the purpose of stamp duty

** As per proposed amendment in Budget 2020.

***Value is to be determined as per Rules prescribed for the purpose of calculating FMV for each property


d. Stamp duty value on immovable property as on which date should be considered for the purposes of complying with the provisions of the Act specified in FAQ c., point ii and iii above?

Ans.

Stamp duty value prevailing on the date of Registration of the immovable 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 by way of an account payee cheque / account payee bank draft/ use of electronic clearing system through a bank account /through such other electronic modes as may be prescribed on or before the date of Agreement for transfer of such immovable property.

e. Are there any exemptions to the Gifts received which are taxable as mentioned in FAQ c. above?

Ans.

The Gifts received by the recipient shall not be taxed if the said gift is received:

 

          i.    from a relative (refer FAQf. 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

 

From an individual by a trust created or established solely for the benefit of relative of the individual; etc.

f. Definition of relative as per the provisions of the Act.

Ans.

·         In case of an Individual:


  i.    spouse of the individual;

 ii.    brother or sister of the individual;

iii.    brother or sister of the spouse of the individual;

iv.    brother or sister of either of the parents of the individual;

 v.    any lineal ascendant or descendant of the individual;

vi.    any lineal ascendant or descendant of the spouse of the individual;

vii.    spouse of the person referred to in clauses (ii) to (vi);

 

·       In case of a HUF:

 

Any Member thereof

g. What is the rate at which the gifts received by a person (which are not exempt) subject to tax in India?

Ans. Gift received by a person (which are not exempt) are taxed under the head“Income from Other Sources” at slab rate applicable to such person.

h. Can a gift of money made by a person resident in India to a NR be taxed in India?

Ans.

Gift of any sum of money, by a person resident in India to a NR (not being a gift to a relative etc. which is otherwise exempt), on or after 5th day of July 2019, shall be taxed in India.

 

Further, the person giving gift to such a NR shall be liable to deducted tax at source (TDS) at the highest rate applicable i.e. 30% on the amount of gift made to the NR.

i. A NRI receives a Gift of Rs.5,00,000/- from his grandfather on his 18th birthday. Will this amount of Gift be taxed in NRI’s hands?

Ans. No. Since the Gift is received from his lineal ascendant, that is, a relative, there will be no tax implication in the hands of NR

j. 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 NR.

k. A NR receives a Gift of Rs.5,00,000/- from his friend who is a resident, on his 18th birthday. Will this amount of Gift be taxed in NR’s hands?

Ans.

Yes. Receipt of such gift of Rs. 5,00,000/- will be taxable in NR’s hands.

 

Further, the NR’s friend is liable to deduct TDS at the rate of 30% on Rs. 5,00,000/-.

l. NR receives an immovable property in India from a Non-relative. Brief facts are as under: Date of Gift: June 25, 2019 Consideration paid by NR: Rs. 24,20,000/- 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 the difference between Stamp duty value and consideration, is higher of following amounts Rs 50,000 and 10% of consideration, then the excess of Stamp duty value over the consideration shall be charged to tax under the head ‘Income from Other Sources’ in the hands of NR.

 

In the present case, Stamp duty value exceeds the actual consideration by Rs.2,80,000/-, which is higher than Rs. 50,000/- and 10% of the actual consideration of Rs. 24,20,000/- i.e. Rs. 2,42,000/-. Accordingly, the difference of Rs. 2,80,000/- (Rs. 27,00,000/- less Rs. 24,20,000/-) shall be treated as income of NR.

m. In FAQ l., what shall be the tax treatment in case the consideration paid by NR is Rs. 26,00,000?

Ans. The difference between actual consideration and Stamp duty value is of Rs. 1,00,000/- (Rs. 27,00,000 less Rs. 26,00,000), which is higher than Rs. 50,000/-, but it does not satisfy the other condition i.e. difference between Stamp duty value and consideration should be more than 10% of consideration of Rs. 26,00,000/- i.e. Rs. 2,60,000/-. Accordingly, said difference of Rs. 1,00,000/- shall not be considered as income in the hands of NR.