GIFT

A valid gift has to satisfy the following requirements:

• Must be voluntary
• Without any consideration
• Accepted by the person to whom it is gifted.

The person giving the gift is called the donor and the person receiving the gift is the donee. The gift maybe accepted by the donee personally or someone on his/her behalf. The acceptance may either be expressed or implied.

 

• Gift Received from Non-relatives

Gifts received from any person or persons other than relatives up to Rs 50,000 in a financial year are exempt from tax. If Gift received in excess of Rs. 50,000 in any financial year, as per income tax laws, the entire amount shall be taxable as ‘Income From Other Sources’ in the hands of individual or HUF under section 56.

For example:

1. If one receives ₹ 60,000 as a gift from any person, the entire amount of ₹ 60,000 would be added to the income and taxed at the slab rate and considered as ‘Income from Other Sources’.
2. If one receives ₹ 50,000 from one friend as a gift and ₹ 35,000 from another friend, the limit of ₹ 50,000 would be considered to be breached. The entire gift value of ₹ 85,000 would be taxable in the hands of receiver of the Gift as ‘Income from Other Sources’.

• Gifts Received from Relatives

As per the Income tax act, the sum of money received from any of your relatives are fully exempt from tax. Here the “relatives” term defines by the Income Tax act as follows:

• 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.
• In case of a Hindu undivided family, any member thereof.

For example:

1. If Mr. A, gifts ₹ 10 lakh to his wife, his wife will, however, not be taxed on the receipt of a gift from her husband, who falls under the specified list of ‘relatives’ who are exempt under the Income Tax Act. This exemption is available irrespective of which tax bracket his wife falls in. The gift is tax-free in her hands, also because he has already paid taxes before making the gift to his wife. However, if his wife creates an Fixed Deposit from the same and earns interest, the interest would be added to the income of the husband. Here, clubbing of income provisions will apply to this interest income and it will be clubbed to husband income and taxed normally. Therefore, Mr. A, must understand that he may not be able to use a financial gift effectively to save tax.
2. If you are receiving sum of money of ₹ 100000 from your uncle (your mother’s brother), it is fully exempt from the Tax.

There is no maximum limit on the value of gifts received to be exempted from Gift Tax. All gifts received from relatives (irrespective of value) are exempted from the levy of Gift Tax.

• Movable Property as Gift 

a) Without consideration:

Where any person receives, in any previous year, from any person or persons any property other than immovable property without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property will be taxable in the hands of receiver.

b) For Inadequate Consideration:

Where any person receives, in any previous year, from any person or persons any property other than immovable property for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration. The excess differential amount will be taxable in the hands of receiver.

• Immovable Property as Gift

a) Without Consideration:

Where any person receives, in any previous year, from any person or persons any immovable property without consideration and the stamp duty value of which exceeds fifty thousand rupees then in such case, the stamp duty value of such property will be taxable in the hands of receiver.

b) For Inadequate Consideration:

Where any person receives, in any previous year, from any person or persons any immovable property for a consideration, the stamp duty value of such property as exceeds such consideration, if the amount of such excess is more than the higher of the following amounts:

(i) the amount of fifty thousand rupees; and

(ii) the amount equal to five percent of the consideration

The excess differential amount will be taxable in the hands of receiver.

• Special Tax Exempt gifts

The following list of gift are fully exempted from Tax whether it is received as Cash, or any other form of the material doesn’t affect the exemption.

• Gift received under a Will or by way of inheritance.
• Gift in contemplation of death of the donor; Gift from any local authority.
• Gift from any fund or foundation or university or other educational institution or hospital or any trust or any institution referred to in Section 10(23C).
• Gift from any trust or institution, which is registered as a public charitable trust or institution under Section 12AA/12A.
• On the occasion of the marriage of the individual.
• By way of transaction not regarded as transfer under section 47.
• From an individual by a trust created or established solely for the benefit of relative of the individual.

 

• In the occasion of Marriage of the Individual

Gifts received by an individual on his own marriage are fully exempted from the levy of Gift Tax. It has also been clarified that the gifts received by a person on his own marriage are exempted and not on the marriage of their son / daughter / brother / sister. There is no monetary limit attached to this exemption.

Note that, if you receive any gifts at the time of engagement or the marriage anniversary it is liable to pay the tax.

• Stamp Duty and Registration of gift deed
• Registration of a gift deed is compulsory in the case of immovable property, irrespective of the value of the property. The gift deed must be signed by the donor and attested by two witnesses.
• Gift deeds attract stamp duty and the amount of stamp duty payable differs across states. In Maharashtra, payment of stamp duty is governed by Maharashtra Stamp Act, 1958.

 

• Do I will or gift?

This is a question that looms large when one wants to transfer assets to a family member. A gift is a voluntary transfer of property from one person to another without compensation or any consideration. A gift comes into effect during the lifetime of the donor unlike the Will that takes effect after the death of the testator. Gift deeds are irrevocable and can be revoked only by the donee. Needless to say, the donor will not be able to claim ownership in the property if he decides to change his mind at a later stage. A gift deed is a better alternative to distribute assets so as to avoid disputes among the legal heirs.

A will may be a cheaper option for distributing property as no stamp duty is payable. One can also amend or revoke the will during one’s life time. If one anticipates disputes in the future or would like the beneficiaries to have the ability to deal with the properties forthwith, one may choose the gift option. Needless to add, the donor cannot revoke the gift if he/she has a change of heart.

Below is a comprehensive list of Donors as per definition of relative under Income Tax Act (Hindi connotation has also been mentioned)

List of Male Donors	List of Female Donors
Father (Papa or Pitaji)	Mother (Maa or Mummy)
Brother (Bhai)	Sister (Behan)
Son (Beta or Putra)	Daughter (Beti or Putri)
Grand Son (Pota or Potra)	Grand Daughter (Poti or Potri)
Husband (Pati)	Wife (Patni)
Sister’s Husband (Jija)	Brother’s Wife (Bhabhi)
Wife’s Brother (Sala)	Wife’s Sister (Sali)
Husband’s Brother (Dewar)	Husband’s Sister (Nanad)
Mother’s Brother (Mama)	Mother’s Sister (Mausi)
Mother’s Sister Husband (Mausa)	Wife’s brother’s wife (Sala Heli or Salhaj)
Father’s Brother (Chacha or Tau)	Father’s Brother’s Wife (Chachi or Tai)
Father’s Sister’s Husband (Fufa)	Father’s Sister (Bua)
Grand Father (Dada)	Grand Mother (Dadi)
Great Grand Father (Pardada)	Great Grand Mother (Pardadi)
Daughter’s Husband (Jawai)	Son’s Wife (Bahu or Putra Vadhu)
Spouse Father (Sasur)	Spouse Mother (Sas)
Spouse Grand Father (Dada Sasur)	Spouse Grand Mother (DadiSas)
Brother’s Wife (Bhabhi)	Mother’s Brother’s Wife (Mami) Husband’s Brother’s Wife (Devrani or Jethani)