Present Tax in India: Guidelines and Exceptions Below Revenue Tax apply; right here is how one can maintain taxman glad

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It’s time to give and obtain items. Nevertheless, whether or not gifting could be thought of to be taxable within the arms of the particular person giving the present or receiving it?

By Homi Mistry, Mousami Nagarsenkar and Hiral Tanna

In a rustic like India, the place households are shut knit and there are a selection of festivals, items are additionally plentiful. Now, the query that arises is whether or not gifting could be thought of to be taxable both within the arms of the particular person giving the present or receiving it? As per revenue tax legal guidelines, giving a present just isn’t taxable for the donor. Nevertheless, receiving items can appeal to tax. If the entire worth of items obtained in the course of the tax 12 months exceeds Rs 50,000, the whole worth of items obtained (topic to the fundamental exemption restrict and specified exclusions) could be taxable. As an example, when you get items of Rs 5,000 every from 11 mates on your own home warming, the entire quantity exceeds Rs 50,000 and therefore the whole Rs 55,000 could be taxable. The tax on items must be paid by means of advance tax / self-assessment tax earlier than the tax return is filed by the particular person receiving the present.

We may obtain items not solely within the type of money, but additionally within the type of movable property and at instances even immovable properties like a home. Sure moveable property together with jewelry, drawings, work, bullion, sculptures, shares and securities obtained as items are topic to tax. In such circumstances, if the truthful market worth of the movable property exceeds Rs 50,000, then the whole quantity is to be included within the taxable revenue. To find out the taxable worth of an immovable property obtained as a present, it is advisable to examine the stamp responsibility worth. If the stamp responsibility worth exceeds Rs 50,000, then the quantity chargeable to revenue tax = Stamp Responsibility Worth – Consideration paid by the recipient, if any.

It’s pertinent to notice right here, that if a property, whether or not moveable or immovable, is bought at lower than its truthful market worth / stamp responsibility worth, the distinction will probably be thought to be a present to the purchaser and taxed in his arms if the distinction exceeds Rs 50,000.

Do all items exceeding Rs 50,000 appeal to tax? No, the next exceptions have been carved out to deal with sure items as exempt:

# Presents obtained from family (definition of relative consists of partner, siblings of self/partner, dad and mom/grandparents of self/ partner, and so forth)

# Presents obtained on the event of marriage of the person

# Presents obtained beneath a will / inheritance / on contemplation of dying of the payer

# Presents obtained from any native authority / fund or basis as laid out in part 10(23C) / belief / establishment registered beneath part 12AA of the home tax legal guidelines

Therefore, chances are you’ll present with none limits to your close to and pricey family with out worrying about tax. Nevertheless, a phrase of warning right here. Any revenue arising to the partner or minor youngsters or daughters-in-law on the present given will probably be clubbed within the arms of the particular person giving the present. For instance, when you present a sum of Rs 75 lakh to your spouse and he or she makes use of this cash to buy a home and receives lease for the home, although the present of Rs 75 lakh won’t be topic to tax both in your or your spouse’s arms, the lease that she receives will probably be thought to be your revenue and be added to your taxable revenue and taxed in accordance with the Revenue Tax Act. It won’t as soon as once more be taxed in her arms. The clubbing provisions are relevant solely to the partner, minor youngsters and daughters-in-law; items to different family don’t appeal to clubbing provisions.

In India, items have been used broadly as a tax planning measure to scale back taxes. Tax authorities, subsequently, usually probe items to ascertain their authenticity and the legitimacy of the sources of funds out of which items have been given. Therefore, it will be prudent to keep up paperwork comparable to a present deed, evidencing the truth that the present has been genuinely obtained and that the particular person giving the present has ample sources of funds to justify the present. Additional, in respect of an immovable property, stamp responsibility additionally must be paid in accordance with the state legal guidelines. In some states like Maharashtra, there’s a concession within the stamp responsibility charges if the property is presented to members of the family.

(Homi Mistry is Accomplice, Mousami Nagarsenkar–Director and Hiral Tanna–Supervisor at Deloitte Haskins & Sells LLP)

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