Gifting is one of the many ways to express love and affection. India is a country with diversified culture where each occasion is a reason to celebrate and show love and affection to close family members and friends. This document covers the background, taxability, exceptions, frequently asked questions
This document covers
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.
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
2.3 Receipt of Movable Property by Individual or HUF: If Movable Property is received
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.
Any sum of money or value of property received in the following circumstances or from persons are not taxable
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.
Gifts received only on the occasion of marriage is exempted from tax. There is no other occasion where individual can claim exemption of taxes on the Gifts. Hence Gifts received on occasions like birthday, anniversary etc will be taxable under the Income from Other sources if there is no consideration or inadequate consideration.
Check Taxability on Wedding Gifts article for more information
No, As the spouse brother is included in the list of relatives, it will not be taxable.
Yes, As the friend is not included in the definition of Relatives, you need to pay taxes under the head Income from Other Sources. The difference between fair market value and amount paid by you i.e., 3 Lakhs-1 Lakh = 2 Lakhs will be taxable
As the consideration is less than Rs 50,000, it is not taxable in your hands under the head Income from other sources.
The taxability of gift needs to be determined on the basis of the aggregate value of gift received during the year and not on the basis of individual gift. As the aggregate value of gifts received during the year exceeds Rs. 50,000, entire Rs 60,000 is taxable in your hands
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