GIFT Tax Applicability & Rate of Tax

GIFT Tax Applicability & Rate of Tax

1. Is Gift Tax abolished in India?
2. In which income head, the tax on gifts is chargeable to income tax?
3. At what rate gifts are chargeable to tax?
4. What is the definition of “Relative”, from whom sum of gifted money or any movable or immovable asset received by an Individual is exempt from tax?
5. Is there any limit on amount to be gifted by relatives to an India which is exempt from tax?
6. Are gifts received on birthday or anniversary exempt to tax?
7. What is aggregate value of gifts for taxability?
8. Are gifts received from employees, friends or employer exempt to tax?
9. What are the types of gifts which are chargeable to tax for an Individual or HUF?
    

1. Is Gift Tax is abolished in India?
2.  
   Initially the gift tax was introduced in India in 1958, but later on it was abolished in the year 1998. Now again in the year 2004 it has been reintroduced with its applicability on monetary gift, gift of movable asset and gift of immovable asset. It has been made as part of income tax chargeability and at the rates applicable as per income tax slabs. This income will be charged in the same return of income tax in the head income from other sources.
    
    
3. In which income head, the tax on gifts is chargeable to income tax?

Any gifts, whether monetary or non-monetary which becomes chargeable to tax because of its threshold and other conditions, it will be charged to income tax as other income under the “head from other sources.”

  3. At what rate gifts are chargeable to tax?

 Any gifts, whether monetary or non-monetary which becomes chargeable due to crossing threshold & other conditions, are added as other income of the assessee under the head “income from other sources”, and are added to other taxable income of the assessee and normal tax rate as per the applicable slabs will apply to the gift income as well.

 4. What is the definition of “Relative”, from whom sum of gifted money or any movable or immovable asset received by an Individual is exempt from tax?

 Following persons are covered in the definition of relative from whom any monetary gifts / gift of movable asset / gift of immovable property to an Individual is exempt from tax: - 

1. Spouse of an Individual
2. Brother or Sister of an Individual
3. Parents of an Individual including any lineal ascendant or descendent of an Individual
4. Parents of the spouse of an individual including any lineal ascendant or descendent of the spouse of an Individual
5. Brother or Sister of the spouse of an Individual
6. Brother or Sister of either of the parents of the Individual
7. Spouse of any the person covered from point 2 to 6
    

5. Is there any limit on amount to be gifted by relatives to an India which is exempt from tax?

 No, if the relative falls in the prescribed list, there is no limit of amount which can gifted to an individual without tax.

6. Are gifts received on birthday or anniversary exempt to tax?

No, the only occasion of marriage is the prescribed occasion on which any monetary or non-monetary gifts by any person to an Individual is exempt to tax. Any gift on any other occasion like birthday, anniversary, retirement etc. are chargeable to tax.

7. What is aggregate value of gifts for taxability?

If an Individual or HUF receives monetary gifts aggregate value of which in a financial year exceeds Rs. 50000, these monetary gifts will be chargeable to tax. “Aggregate value” here means total sum of money received as gift from all the eligible persons during a financial year.

In case the aggregate value exceeds 50000, the entire amount is taxable.

8. Are gifts received from employees, friends or employer exempt to tax?

No, only gift received from relatives are exempt from tax, since employees, friends or employer do not fall in the definition of relative, monetary gift received will be chargeable to tax.

9.  What are the types of gifts which are chargeable to tax for an Individual or HUF?

Following type of gits are chargeable to tax if received by an individual or HUF subject to certain conditions: -

 Monetary Gifts: -

1. Any sum of money whether by way of cash, cheque, bank draft or any other banking transfer modes, received without consideration is called the “Monetary Gifts.”
    
2. Gift of Movable Asset: -
   Any prescribed movable asset received by an individual or HUF without consideration is called “Gift of Movable Asset.”
   Gifted Prescribed Asset for tax chargeability consists of shares or securities, jewellery, paintings, drawings, archaeological collections, sculptures or any other work of art and bullion being capital asset of the taxpayer.

1. Gift of Movable Asset at Concessional Price: -
   Any prescribed movable asset received by an individual or HUF with consideration less than its market value is called “Gift of Movable Asset at concessional price.”
    
2. Gift of Immovable property: -
   Any immovable property received by an individual or HUF without consideration is called “Gift of immovable property.”
    
3. Gift of Immovable property at Concessional Price: -
   Any immovable property received by an individual or HUF with consideration less than its stamp duty value i.e. derived by multiplying area with the Govt prescribed rates for stamp duty calculation is called “Gift of immovable property less than its stamp duty value.”