Gifting is probably going thought-about certainly one of many widespread modes of swap of money or property in India. Moreover it’s used as a tax planning or tax avoiding medium, attributable to which the federal authorities launched the Reward Tax Act in 1958. This was abolished in 1998 and objects have come under the Earnings Tax Act, 1961.
For the goal of Taxation, a gift refers as soon as extra to the receipt of a sum of money, property or one take into account selection, by any specific particular person with out or for inadequate consideration. For the receipt of points the place the mix price exceeds Rs 50,000 in a yr, your complete amount is taxable under half 56(2) of the Earnings Tax Act, with constructive exceptions.
Presents exempted from taxation
Any reward obtained by an individual from his or her relations on any occasion is exempt from tax. A relative, for this aim, means brother or sister, accomplice, dad and mother and their siblings, any lineal ascendants or descendants of the particular particular person or his or her accomplice.
A mom or father gifting Rs 1 Lakh to his son or a plot to the daughter is tax free. Nevertheless a gift of Rs 1 lakh obtained from a beautiful good good good friend or colleague, is taxable. Briefly, the reward obtained from mates or anyone aside from the required relations are taxable.
A son, an NRI, dwelling contained within the USA transfers Rs 10 lakhs to his dad and mother in India. Will it is taxable? No, whatever the quantum of money (no larger prohibit) or the place of shield of the donor, if gifting is accomplished among the many many many many specified relations, it is exempt from tax. Likewise, dad and mother in India can repatriate funds as a gift to their youngsters staying abroad under the Liberalized Remittance Scheme (LRS).
Any money or property obtained under WILL or by the use of inheritance or in contemplation of dying of the payer or donor should not be taxable. Suppose, licensed heirs of the deceased get their share of property or money it is categorized as not taxable.
What kind of objects are taxable
Secondly, money obtained from anyone, on the occasion of the marriage of the particular particular person should not be a taxable reward. This implies, combination objects obtained all through the yr, in further of Rs 50,000, on birthdays, anniversaries, festivals, and so forth, are taxable.
Suppose, in your birthday, a beautiful good good good friend objects you Rs 20,000, a colleague objects Rs 30,000 and a cousin objects Rs.25,000 , your full amount of Rs 75,000 is taxable, as a result of the mix amount exceeds the brink prohibit. If this was the wedding instead of the birthday, your full amount is exempt from tax!
Presents obtained from the employer as hundreds as Rs 5,000 a yr are exempt from tax. For instance, an employee will get Rs 15,000 as a gift from the employer, tax is levied on Rs 10,000.
One should moreover know clubbing provisions under the Act, when the income is earned from the money, belongings or property gifted by the husband. Say, if the girl will get a flat as a gift from her husband and earns, say Rs 3 Lakhs as annual lease, then the rental income is taxable contained within the fingers of the husband as per Half 64 of the IT Act.
Likewise, objects made to the daughter-in-law and minor little one are taxed contained within the fingers of the donor. Gifting immovable property to relations are exempt from tax whatever the number of properties or the price of the property.
In case of unrelated celebration transactions, if the excellence between the steering price (price adopted for computing stamp obligation) and the exact consideration exceeds higher of Rs 50,000 and 10 per cent of the actual sale consideration, then, the excellence between the steering price and the exact consideration shall be taxed contained within the fingers of the patron under half 56 and the seller has to pay capital purchase tax under half 50C, considering the steering price due to the deemed price of the sale.
All objects should be declared of their Earnings Tax Return. All exempt income obtained all through the yr should be declared under Schedule EI in ITR Kind.
Ought to there be a written doc in assist of gifting? All immovable properties mandatorily require a duly registered Reward Deed as per Stamp Act and for gifting of movable belongings or money, it is optionally accessible to execute the deed. Nonetheless, it is advisable to make a Reward deed, (needn’t be registered) signed by every donor and donee, along with the witness. Lastly, avoid gifting with cash.
(The creator is a Chartered Accountant and Registered Valuer, Bangalore)