Tax On Gifts In India: Exemption & Criteria

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Gifting has been an integral part of Indian culture and has been looked up to as a symbol of love and affection. At certain times, gifting also signifies social status. However, in some cases, the value of expensive gifts like jewelry, residential property, paintings, artifacts, etc., can be substantial. So in this blog, we will be discussing the various rules and regulations on how Tax On Gifts In India.

So the Parliament of India introduced the Gift Tax Act in 1958, and the tax is essentially charged on the receipt of the gifts. According to the Income Tax Act, all gifts whose value is more than Rs 50,000 are subjected to gift tax with the receipt.

However, in 1998 the Gift Tax Act was repealed, and gifts and presents, irrespective of their value, were tax-free until new rules for gift taxation were introduced in 2004. These new rules came as a part of the Income Tax Act. The provisions were later improvised in 2010. However, you can easily be confused due to the multiple changes in the gift tax.

According to the income tax act, what is a gift?

According to the definition provided by the Income Tax Act, a ‘gift’ can be in any form of demand drafts, cash, bank checks, or other valuables. In technical terms, the person who will be gifting is called the Doner, while the person who will receive the gift will be known as the Donee.

According to the 2017 amended law, any type of gift received by an individual or a group of individuals will be taxed at the hand of the receiver as ‘income from other sources. You will need to pay the tax on gifts in India while your Income Tax Return Filing. Some of the presents that will be taxable in India are:

  • Immovable properties like land, residential buildings, residential or commercial property
  • Some of the movable properties that shall be taxed are paintings, sculptures, jewelry, shares, bonds, etc.

Which of the gifts exempted from income tax?

Which of the gifts exempted from income tax

According to the new tax laws, not all gifts received in India will be subjected to tax.  Hence, there are some gifts as per specific situations that have tax exemption. For example, if you get a  cash gift of Rs 50,000 in a financial year, you are exempted from paying any gift tax.

  1. Likewise, if you receive or get a present from your relatives like parents, siblings, spouse, or other close relatives like in-laws, there is no tax liability. Also, this tax exemption from gift taxation is applicable no matter what the value is.
  2. As per the Indian heritage, it is common to give expensive gifts like exotic jewelry and even property on the occasion of marriage, engagement, or birthday. But, according to the current tax rules, you do not have to pay any tax on the gifts you have received in your marriage, irrespective of the amount.
  3. If you receive any sort of money or property as an inheritance or via a will which is legally considered a gift as you are not making any payment to receive it. In this case, also, no tax against the gift is applicable.
  4. Also, if you receive money or property from the local authorities or the government, or any other recognized religious or charitable organization, no gift taxes are applicable.

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What are the taxation criteria?

The type of gift

When is Gift Tax applicable?

What is the taxable value of the gift?

Cash, bank draft, or bank transfer Is the value of the gift exceeds Rs 50000 The entire amount of money received as the gift
Any type of immovable property that includes property purchased at a price lower than the stamp duty value of the property Is the stamp duty value of the gifted property exceeds the positive price by more than Re 50000 The difference in the amount between the stamp duty value and the purchased price of the gifted property is taxable.
All assets like jewelry, paintings, shares, bonds, sculptures (without making a payment) Is the fair market value of the gifted item is more than Rs 50000 The fair market value of the gift
Various assets like jewelry, paintings, bonds, sculptures bought by the donor before being gifted If the fair market value of the item exceeds the purchasing price by more than Rs 50000 The difference between the fair market value and the purchase price of the gift is taxable
An immovable item like land, buildings (without making any payment) If the overall stamp duty value of the gift is more than Rs 50000 Stamp duty value of the property as received as a gift

Final verdict

Now as we come to the end of our article, we hope that you have a clear understanding of how the gift taxation system works in India. Also, You can avail benefits of ITR Filing by paying tax on gifts in India.

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Moreover, If you want any other guidance relating to ITR  Filling, please feel free to talk to our business advisors at 8881-069-069.

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