Until the financial year 2003-04, if there is any Gifts received by the person then it will not be taxable as an income of such person as per the provisions of the Income Tax Act but from 2004, if there are any gift received by the person then it will be considered as an income and it will be taxable in the hands of receipt.
As per the current provision of the Income Tax Act 1961, if any amount which is received by an individual or HUF and it is more than Rs.50,000 in a financial year from any unrelated person, in cash or by way of credit then it will be considered as income of such person and it will be included in his total income for the purpose of taxation.
In simple words, if there is any gift received by an individual or HUF from its related person (relatives) then it will not be taxable.
Meaning of Gift
Gift means and amount of money given in cash or cheque, any movable & immovable property such as land or building or shares, jewelry, etc. are given without any consideration or inadequate consideration will be considered as Gift.
Taxation on Gift
As per the provision of the Income Tax Act 1961, if there is any individual or HUF receive any gift from its an unrelated person then such gift will be taxable in the hands of receipt and if it is received from relatives then it will not consider as income of such receipt and will not be taxable.
For example, Mr. Mohan has received 55000 from his father on his birthday as a gift, such 55000 will not be taxable under the Income Tax Act. But if Mr. Mohan receives 55000 from his friend on his birthday then it will be taxable as per the Income Tax Act because the friend is not covered in the definition of relatives.
The provision of gift taxability is as follow-
| Gift | Monetary threshold | Taxability |
| Any amount of money received as a gift without consideration | Amount more than 50,000 | The entire amount of money received will be taxable |
| Any immovable property such as land, building, etc. without consideration | Stamp duty value (SDV) is more than Rs 50,000 | The Stamp duty value of such property will be taxable. |
| Any immovable property for inadequate consideration | Stamp duty value – consideration is more than Rs. 50000 | Stamp duty value – consideration (paid)= will be taxable |
| Any property other than an immovable property without any consideration | Fair market value (FMV) is more than Rs 50,000 | FMV of such property will be taxable |
| Any property other than immovable property for an inadequate consideration | FMV less consideration made is more than Rs 50,000 | FMV less consideration paid= will be taxable. |
(i) Gifts Received at Marriage
If there is any individual who receives any gift on the occasion of his / her marriage then it will be exempted from tax.
(ii) If there is any individual who receives any gift from relatives then it will be exempted from tax.
(iii) If there is any person who received any gift from any person under a will or by way of inheritance then it will be exempted from tax.
(iv) If there is any person who received any gift from any individual in contemplation of death of payer then it will be exempted from tax.
(v) If there is any person who received any gift from Municipal Committee, Cantonment Board, Panchayat, Municipality, and District Board then it will not be taxable.
(vi) If there is any person who received any gift from any charitable or religious trust which is registered under section 12A or section 12AAthen it will not be taxable.
(vii) If there is any person who received any gift from any fund or foundation or hospital or other medical institution, university or other educational institution or any trust or institution which is referred to Section 10(23C) then it will not be taxable.
(viii) Any gift which is received by any institution or fund or trust or any university or other educational institution or any hospital or other medical institution incorporate for the religious purpose, charitable purpose, educational purpose, philanthropic purpose and which is approved by the prescribed authority by a person then such gift will not be taxable.
(ix) Any gift which is received by any member of the HUF from the HUF on the distribution of capital assets on the total or partial partition of a HUF,will not be taxable.
(x) Any gift which is received by the trust which is established only for the benefit of relative of the Individual and such gift is received from an individual will not be taxable.
Definition of Relatives/who are relatives?
As per the Income Tax Act, there is a list of persons who is considered as a relative of an individual. The list is a follow-
- Spouse of the individual.
- Brother or sister of the individual.
- Brother or sister of the spouse of the individual.
- Brother or sister of either of the parents of the individual.
- Any lineal ascendant or descendant of the individual.
- Any lineal ascendant or descendant of the spouse of the individual.
- Spouse of the persons referred to in (2) to (6).
As per the Income Tax Act 1961, a gift received from any of the members of the HUF is exempt from Income Tax in the hands of HUF.
