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Following gifts received by Individual or HUF are taxable  

Gift of money

Gift of Immovable Property 

Gift of Movable Property

Cash gift greater than 50,000 is Taxable 

(1) If received without consideration then  Stamp duty value >50,000 taxable

(1) If received without Consideration then  Fair Market Value >50,000 taxable

 

(2) If received for Inadequate consideration  (Stamp duty value – Consideration) > 50000 taxable

(2) If received for Inadequate Consideration  (Fair Market Value – Consideration) > 50000 taxable

(Aggregate of all cash gifts received in year to be taken to calculate 50000 limit)

-

(Aggregate of all gifts of movable property to be taken  to calculate 50000 limit)

 

 

 

Exceptions

Following gifts are not taxable

  1. Gifts from relatives
  2. Gift received on occasion of marriage   (Whether received from friends or relatives)
  3.  Under will / Inheritance
  4.  In contemplation of death  (No will has been prepared but a person is about to die and he gives some amount to any person) 
  5.  Any trust (registered under section 10A)
  6.  Any local authority
  7.  Any university / Fund / Foundation / Educational institute / hospital / medical institution etc. (section 10 (23C)
  8. transaction not regarded as transfer under clause ( vicb ) or clause ( vid ) or clause ( vii ) of Section 47 (These include transfer of shares in case of Amalgamation /Demerger of Company/Business Reoqrginaztion of a Cooperative Bank) (NEW AMENDMENT)

 

Effect of Amendment

Suppose Mr Rajesh has  shares of A ltd

A Ltd got amalgmated with B ltd

Mr Rajesh is allotted  shares of B Ltd

These shares of B Ltd will not be called Gift

 

Similar is the case in case of

  • Demerger of Co
  • Business Organixation of Cooperative Bank

 

Note:-

1.Definition of Relative

In Case of Individual

 

In Case of HUF

 

  • Spouse
  • Brother – Sister
  • Brother – Sister, of spouse
  • Brother – Sister, of parents.
  • Lineal Ascendant Or Descendant of individual or Spouse
  • Spouse, of  above
All Members of HUF

 

(2)  Only following types of movable property covered

  • Shares / securities
  • Jewellery or bullion
  • Archaeological collations
  • Any work of art like painting , drawing sculptures  

(Items like Motor Cars,TV/Fridge not covered) 

 All these are taxable if these are capital assets.If these are in nature of business assets,then not taxable in this section

 

3.Date of Stamp Value

Normally stamp duty value taken on date of registration

However,if date of agreement fixing consideration and date of registration are different and some amount received in advance at the time of agreement in any form other than cash,then stamp duty value at the time of registration to be taken

 

Date of Agreement is before Date of Registration+Some Amount received in advance+ Amount of advance not paid in cash

=Stamp Value as per Date of Agreement

Otherwise Stamp Value as on Date of Registration

 

 

 EXAM QUESTIONS

Illustration 1

Mr. A, a dealer in shares, received the following without consideration during the P.Y.201 5-16
from his friend Mr. B, -
(1) Cash gift of Rs. 75,000 on his anniversary, 15th April, 2015.

-a-

It is taxable as amount greater than 50000 and not covered in exception

-ea-

(2) Bullion, the fair market value of which was Rs.Rs 60,000, on his birthday, 19th June, 2015.

-a-

It is a moveable property Also since amount greater than 50000 and not covered in exceptions,hence taxable

-ea-

(3) A plot of land at Faridabad on 1st July, 2015, the stamp value of which is Rs. 5 lakh on that date. Mr. B had purchased the land in April, 2008.

-a-

Stamp Duty Value =Date of Registration=500000

SInce it is more than 50000,hence taxable

-ea-

Mr.A purchased from his friend Mr. C, who is also a dealer in shares, 1000 shares of X Ltd. @ 400 each on 19th June, 2015, the fair market value of which was Rs 600 each on that date.

Mr. A sold these shares in the course of his business on 23rd June, 2015.

-a-

Since Mr A is dealer in shares,hence not taxable under PGBP as it is not capital asset

-ea-

On 1st November, 2015, Mr. A took possession of property (building) booked by him two years back at Rs 20 lakh. The stamp duty value of the property as on 1st November, 2015 was Rs 32 lakh and on the date of booking was Rs 23 lakh. He had paid Rs 1 lakh by cheque as down payment on the date of booking.

-a-

Date of Agreement is before Date of Registration+Some Amount received in advance+ Amount of advance not paid in cash

=Stamp Value as per Date of Agreement

=23000000

 

Purchase Price=2000000

Difference=300000

Since difference is more than 5000,whole 300000 is taxable as Income from Other Sources

-ea-

On 1st March, 2016, he sold the plot of land at Faridabad for Rs 7 lakh.

-a-

In this case,Capital Gain will be computed

Full Value of Consideration =700000

Less

Cost of Acquisition=500000 (Stamp Value of Property)

Capital Gain=200000

-ea-

Q2  

Discuss the taxability or otherwise of the following in the hands of the recipient under section
56(2)(vii) the Income-tax Act, 1961 -
(i) Akhil HUF received Rs. 75,000 in cash from niece of Akhil (i.e., daughter of Akhil’s sister). Akhil is the Karta of the HUF.

-a-

Neice is not covered in definition of Relative in case of HUF.

Also amount is more than 50000,hence taxable

-ea-

(ii) Nitisha, a member of her father’s HUF, transferred a house property to the HUF without consideration. The stamp duty value of the house property is Rs. 9,00,000.

-a-

Nitisha is a member of HUF,hence a relative.Hence gift not taxable

-ea-

(iii) Mr. Akshat received 100 shares of A Ltd. from his friend as a gift on occasion of his 25 th marriage anniversary.

The fair market value on that date was Rs 100 per share. He also received jewellery worth Rs. 45,000 (FMV) from his nephew on the same day.

-a-

Total Value of both gifts=100*100+45000=10000+45000=55000

Since it is more than 50000,hence taxable

-ea-

(iv) Kishan HUF gifted a car to son of Karta for achieving good marks in XII board examination. The fair market value of the car is Rs. 5,25,000 

-a-

Car is not covered in definition of Property,hence not taxable

-ea-

  1. Income Tax
  2. Income from Other Sources
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About the Author

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CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 6 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com .
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