If you want to know how are gifts taxed then read this full post of Gift Tax In India and Rules of Income Tax on Gifts in India.
How Gift Tax in India Applies?
India is a state of near knitted households and with a whole lot of reasons to observe due to its hierarchical culture, habits, and religion. A lot of events arise in which presents are exchanged. In reality gifting, each other is a sign of affection and love and may also be a sign of social standing. But many times present may also be part of tax planning/tax evasion. While tax preparation done within the frame of legislation is payable, tax evasion is illegal and may be penalized.
The Government introduced the present tax in April 1958 governed by Gift Tax Act, 1958 (The GTA) with a goal to enforce taxes on receiving and giving presents under certain specific conditions. Gifts in the shape of money, demand draft, bank cheques, or anything using a value were coated. However, Gift Tax in India has been reintroduced at a new form and contained in the Income Tax provisions from 2004.
It’s exceedingly important to get a fundamental comprehension of taxation on presents in India to prevent any dumb /unplanned tax outflow.
1. Gift tax in India Process
In accordance with the legislation as it stands now, that was piled in 2017, talent obtained by any individual by any individual or persons are residing in the hands of the receiver under the head income from other sources’ at normal tax prices. We’ve discussed below the type of gifts that are coated and it’s quantum to be taxed.
The provisions concerning gift tax in India have been dealt with under Section 56(2)(x) of their Income Tax Act, 1961. These terms have been temporarily captured in the Kind of the table below:
|Kind of gift covered||Monetary threshold||Quantum taxable|
|Any sum of money without consideration||Sum > 50,000||The entire sum of money received|
|Any immovable property such as land, building, etc without consideration||Stamp duty value* > Rs 50,000||Stamp duty value of the property|
|Any immovable property for inadequate consideration||Stamp duty value* exceeds consideration by > Rs 50,000||Stamp duty value Minus consideration
Example 1:Stamp duty value Rs 2,00,000 Consideration Rs 75,000.Taxable amount is Rs 1.25 lakhs (stamp duty value exceeds consideration by > Rs 50,000)
In Example 1, if consideration is Rs 1,60,000, taxable gift is is Nil as stamp duty value does not exceed consideration by > Rs 50,000
|Any property (jewelry, shares, drawings, etc) other than an immovable property without consideration||Fair market value *(FMV) > Rs 50,000||FMV of such property|
|Any property other than immovable property for a consideration||FMV exceeds consideration by > Rs 50,000||FMV Minus consideration (The same example in case of immovable property can be referred)|
2. Provisions about Stamp Duty
Provisions about contemplating the stamp duty worth are like the provisions according to Department 50C. We’ve discussed the supply for the purpose of present tax in short below:
For the purpose of calculating the gift tax in India process in the event of immovable property, stamp duty worth is the thing that should be thought about. But, stamp duty value could be greater due to diverse reasons and a few of these reasons can be the substantial time difference between arrangement fixing the date and consideration of enrollment. Thus, for the purpose of present tax, stamp duty significance according to the date of agreement adjusting the thought Have to Be considered when the following requirements are fulfilled:
Further, in the event the citizen has contested or contested the stamp duty worth embraced by postage duty valuation authority according to Section 50C, the tax officer must consult the valuation into a valuation officer (VO) and the VO must call for documents and provide a chance of being heard of the taxpayer and pass an order in writing of worth he’s arrived. With the intention of present taxation, lower stamp duty worth or value came by VO must be adopted.
3. Exemptions from present tax
As stated previously, certainly given gifts obtained by any individual from any person/persons brings present taxation. But, below are a few exceptions for this.
|Category of donee(recipient of the gift)||Category of donor||Occasion covered|
(It may be relevant to note here that while gift from a defined relative is not taxable for the donee, income from such gifts may in some cases taxable in the hands of donor itself – Example clubbing provisions, deemed owner concept in the house property, etc)
|Relative – spouse, brother and sister of self and spouse, brother or sister of parents or parents in law, any lineal ascendant or descendant of self or spouse, spouse of any of the relatives mentioned here.||NA|
|Individual||Any person||Marriage of Individual|
|Any person||Any person||Under a will or by way of inheritance|
|Any person||Individual||In contemplation of death of donor or payer|
|Any person||Local authority – Panchayat, Municipality, Municipal Committee and District Board, Cantonment Board||NA|
|Any person||from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to Section 10(23C)||NA|
|Any person||Any charitable or religious trust registered under section 12A or section 12AA||NA|
|Any fund or trust or institution or any university or other educational institution or any hospital or other medical institution established for charitable/religious/educational /philanthropic purpose and approved by the prescribed authority. [Refer Section 10(23C) (iv) (v) (vi) and (via)]||Any person||NA|
|Members of HUF||HUF||Any distribution of capital assets on the total or partial partition of a HUF|
|Trust created or established solely for the benefit of relative of the Individual||Individual||NA|
Because of extensive tax planning with presents, contributions in India normally fall under the scrutiny of the taxation division, particularly when the quantum is enormous. Consequently, it could be a good idea to keep documentation to establish the genuineness of the present received an adequate supply of funds together with the donor to warrant the present.
FAQs(Frequently Asked Questions)
How do I check my income tax?
To see Refund/ Demand Status, please follow the below steps:
- Log in to the e-Filing site (https://incometaxindiaefiling.gov.in/) with the User ID, Password, Date of Birth / Date of Incorporation, and Captcha.
- Go to My Account and click “Refund/Demand Status”.
- Here details will be exhibited. Assessment Year. Status. Reason (For instance Failure if any)
What’s income tax describe?
Key Takeaways. Income tax is a form of taxation that authorities impose on earnings made by companies and individuals in their jurisdiction. Income tax can be used to finance public agencies, cover government duties, and supply products for taxpayers.