Tax on Gifts in India | Exemption and Rules

This document covers

1. Background on Gift Tax
2. Taxability of Gifts
3. Gift Tax Calculator
4. Exceptions for Taxability of Gifts
5. Can the amount gifted to spouse reduce the tax?
6. Frequent Questions

1. Background on Gift Tax

The Government introduced Gift Tax in 1958 with an objective to impose taxes on gifts. Later Gift tax was abolished in 1998.

Later Gifts are brought into taxation w.e.f 2017. Section 56(2)(x) is introduced in Income Tax Act 1961 to tax the gifts. Any sum of money or value of property received without consideration or for inadequate consideration will be subject to tax in the hands of recipient.

2. Taxability of Gifts

The following are the cases in which gifts are taxable. Gifts are taxable in the hands of recipient under the head of "Income from Other Sources"

2.1 Monetary gifts received by Individuals/HUF: Any amount of money received by an individual/ HUF without consideration and the aggregate value of such money received during the year exceeds Rs 50000, it is taxable in the hands of individual or HUF.

Note: Monetary Gift includes amount received in cash, cheque, draft etc

2.2 Receipt of Immovable Property by Individual or HUF: If an immovable property is received

1. Without Consideration: Stamp Duty Value of such property would be taxed in the hands of recipient if its exceeds Rs 50,000. It will be taxed under the head of "Income from Other Sources"
2. For Inadequate Consideration: If consideration is less than the stamp duty value of the property and the difference between the stamp duty value and consideration is more than the higher of
• Rs 50,000 and
• 10% of consideration

2.3 Receipt of Movable Property by Individual or HUF: If Movable Property is received

1. Without Consideration: The Fair Market Value of such receipt on the date of receipt would be taxed in the hands of recipient if it exceeds Rs 50,000. It will be taxed under the head of "Income from Other Sources".
2. For Inadequate Consideration: If the difference between the fair market value and such consideration exceeds Rs 50,000, such difference shall be chargeable to tax in the hands of recipient as "Income from Other Sources".

3. Gift Tax Calculator

Gifts are of three types monetary, immovable property, and movable property, the taxability on such gifts vary depending on the Occasion and the person and/or entity from which such gift was received. Gift Tax Calculator gives you the taxability of a transaction.

4. Exceptions for Taxability of Gifts

Any sum of money or value of property received in the following circumstances or from persons are not taxable

1. Received from any relative
2. Received on the occasion of marriage of the individual. Refer Taxability on Wedding Gifts for a detailed information
3. Received under a will or by way of inheritance
4. Received in Contemplation of death of the payer or donor
5. Received from any Local Authority
6. Received from any fund, foundation, university, other educational institution, hospital or medical institution or any trust referred in Sec 10(23C)
7. Received from a trust or institution registered u/s 12AA or 12AB
8. Received from such class of persons and subject to such conditions as may be prescribed

5. Can the amount gifted to spouse reduce the tax?

There is no restriction on the amount of gift given by husband to wife or vice versa. There is no taxability as spouse is covered in the list of relatives. But before gifting, you need to pay taxes on the income earned. For the amount gifted to spouse, you will not get any tax deduction or exemption.

If you wife earns any income on the gift given, it will be clubbed in your hands as income in the year of receipt.

6. FAQs