TAX TREATMENTS ON GIFT

 

The amendment of Sec 56(2) of the income tax act has intensely changed the scenario of the tax treatment of gifts received by an assessee. The amended provision states that

·       Where any sum of money exceeding Rs.50000 (gift in cash or cheque or draft) in aggregate in any previous year is received by an individual or HUF without any consideration, the sum shall be deemed to be the income of the recipient.

·       Any immovable property without any consideration is received and the stamp duty value of such property exceeds Rs. 50000, the stamp duty value will be taxable in the hand of the recipient.

·       Any immovable property is received for a consideration which is less than the stamp duty value of the property by an amount exceeding Rs. 50,000, then the difference between stamp duty value and consideration is chargeable to tax.

·       Any movable property is received without consideration, and the fair market value of which exceeds Rs. 50,000, the whole of the aggregate fair market value of such property.

·       Any movable property is received for a consideration which is less than the aggregate fair market value of the property by an amount exceeding Rs. 50,000, then the difference between aggregate fair market value and the consideration is chargeable to tax.

In the following situations any sum of money or property received shall be exempt from tax:

·       On the occasion of the marriage of individual

·       Received under a will / Inheritance

·       Contemplation of death of the payer

·       Receipt from Local Authority

·       From any fund, foundation, university, other educational institution, hospital, medical institution, any trust or institution u/s {Sec 10(23C)}.

·       From any charitable institute registered u/s 12AA.

·       From relatives

	Relatives means	Example – Taxpayer is Mr. A
i.	Spouse of the individual	Mrs. A
ii.	Brothers or sisters of the Individual	Brothers or sisters of A
iii.	Brother or sister of the spouse of individual	Brothers or sisters of Mrs.  A
iv.	Brother or sister of the parents of the individual	Brothers and sister of father and mother of A
v.	Any lineal ascendant or descendant of the Individual	lineal ascendant or descendant of A
vi.	Any lineal ascendant or descendant of spouse of the Individual	lineal ascendant or descendant of Mrs. A
vii.	Spouse of the person referred to in pt (ii) to (v)	Spouse of the aforesaid persons.

As a measure of tax planning, one should avoid giving gift to spouse or son’s wife because in that case clubbing provisions u/s 64 will be attracted that is income from the gifted amount will be added in the income of the donor