What is Gift Income?
Any receipt without consideration or receipt with inadequate consideration from relatives (as defined under Income Tax Act) is not taxable. However, certain receipt without consideration or receipts with inadequate consideration even from non-relatives is not taxable. This can be very effectively used as a tool for tax planning.
Here, receipt without consideration or receipt with inadequate consideration includes receipt of cash, movable and immovable property. As per the Explanation provided u/s 56(2)(vii), Property means the following Capital Asset (as defined u/s 2(14)) of the assessee namely:-
a. immovable property being land or building or both;
b. shares and securities;
c. jewellery;
d. archaeological collections;
e. drawings;
f. paintings;
g. sculptures;
h. any work of art;[or]
i. bullion
Thus, receipt of above Capital Asset by Individual or HUF as gift will attract Income Tax u/s 56(2)(vii).
Gift from relatives is not at all taxable under Income Tax Act,1961 but in following cases gift from Non-Relatives is also not taxable.
Gift on occasion of marriage:-
On occasion of marriage an Individual can receive gifts of any amount from anybody i.e. there is no limit on the amount of gift received. E.g. Mr. Ram close friend of Miss Kausalay gifts Miss Sonia on her wedding flat worth Rs.25,00,000. This transaction is not at all taxable, as gift, in the hands of Sonia. Further, Mrs. Kausalya gets divorced and remarries Mr. Dasarath, Mr. Ram gifts her this time Gold worth Rs.25,00,000. Again this transaction is also not taxable in the hands of Miss Sonia as gifts received on re-marriage (after getting legally separated from former husband) are also not taxable. Thus, marriages can be said to be the best tool for tax planning!!!!
Gift in the form of Movable Property for inadequate consideration from Non-relatives :-
Movable Property received by Individual or HUF from anybody (non-relatives) for inadequate consideration, will not be taxable if aggregate of the difference between Fair Market Value of property received in the Previous Year and Consideration actually paid by the recipient in the Previous Year does not exceed Rs.50,000.
Gift in the form of Movable Property without consideration from Non-relatives :-
Movable Property received by Individual or HUF from anybody (non-relatives) without consideration, will not be taxable if aggregate of Fair Market Value of property received in Previous Year does not exceed Rs.50,000.
E.g.
Property received from- Type of Property Case-A Case-B
Mr. Amar Shares 25,000 25,000
Mr. Akbar Gold 15,000 15,000
Mr. Anthony Paintings 10,000 11,000
Total receipts during the Previous Year 50,000 51,000
Taxability Not Taxable Fully Taxable
Gift in cash(includes cheque and draft) from Non-relatives :-
In country like India, where we celebrate festivals almost every week, family function almost every month on occasion of birthdays, anniversaries etc., receipt of cash from non-relatives on these occasion is very common. Aggregate cash gift received in Previous Year (as defined u/s3 of Income Tax Act) from non-relatives will not be taxable if the amount does not exceed Rs.50,000/-.
E.g.
Cash gifts from- Case-A Case-B
Mr. Hemanta 10,000 10,000
Mr. Dipak 20,000 20,000
Mr. Aswini 20,000 20,001
Total receipts during the Previous Year 50,000 50,001
Taxability Not Taxable Fully Taxable
Thus, even a single rupee received in excess of Rs.50,000 will make the whole amount taxable.