Gift Tax India

Once upon a time, there was no Gift Tax in India. But during the recent time, the government of India has applied a Gift Tax on gifts. So if your friend or relative is generous enough to give you an expensive gift that crosses the certain limit than you may be eligible for Gift Tax.

This Quick Guide will teach you the Basics about Gift Tax in India.

Gift Tax -

The Basic Rule of Gift Tax is that, the giver will not be taxed but the recipient of the gift will be taxed.

Thus, if you are an Individual or HUF (Hindu Undivided Family) and if you receive a gift that exceeds above the amount of Rs.50,000 than you MUST have to add this gift into your Total Income and it will be taxed according to your Tax Slab.

If your all the gifts exceeds the value of Rs.50,000 then you have to pay tax on the entire amount and not simply on the difference. If you fail to make this payment, then the IT act has provisions whereby in addition to the interest liability, you could end up having to pay one to three times the amount of tax you were supposed to pay on the income from gifts.

Gift Tax Rule Exemption -

The Only times when you are exempt from these rules are if the gifts are made by relatives, exchanged during marriage ceremonies or fall to your lot under the prescriptions of WILL.

The Definition of Gifts -

The definition of gifts doesn’t only include the Cash gifts. But it also includes all the Assets such as Stocks (Shares), Property, Art, Paintings, and any other non-cash assets.

Also where a Realty Deal is agreed between two independent parties at a value lower than the stamp duty value, the buyer may end up paying tax on the difference between the transaction value and the stamp duty value if such difference is in excess of Rs.50,000.

For movable Property the basis is the fair market value.

Who are your Relatives? -

According to Section 56 of I-T Act, a relative would include,

- Spouse of an Individual
- Brother or Sister of an Individual
- Brother or Sister of Spouse of an Individual
- Brother or Sister of either of parents of Individuals
- Any lineal ascendant or descendant of Individual
- Spouse of persons referred to above