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Shalabh Jain (SM)     06 October 2011

Gift tax

Hello practioners,

My wife's mother (70 yrs.) will sell her home. She wishes to donate cash 50 lacs to my wife for a new home. Both not earning.

1. Will it be taxable?

2. Is gift deed is mendatory? Will we need to pay for it?

--Shalabh jain



 12 Replies

Shailesh Kr. Shah (Advocate)     07 October 2011

1.No gift tax is payable.

2.No need to gift deed.

A V Vishal (Advocate)     07 October 2011

My wife's mother (70 yrs.) will sell her home. She wishes to donate cash 50 lacs to my wife for a new home. Both not earning.

1. Will it be taxable?

Ans: Gift is not taxable, however your MIL will attract Capital gains on sale of the property.

2. Is gift deed is mendatory? Will we need to pay for it?

Ans. It is prudent to get a gift deed for the money received since it will be useful from income tax point of view in order to prove genuineness of the amount received.

Anumita Sarkar (Tax Advisor/Litigator)     07 October 2011

I completely agree with Advocate Vishal. It is advisable to execute a gift deed to prove the genuinity of the cash amounting to 50 lacs. Mr. Jain, i would suggest you to also go through/refer sec-56 (2) of the Income Tax Act, 1961, as the same would help you to clarify your doubts. Also read the expalantion  pertaining to the definititon of 'relative' in order to understand the relevance/importance of the execution of gift deed.

Shalabh Jain (SM)     08 October 2011

Thanks everyone for prompt reply. It is quite crisp and completeness.

Jolly James 9447287658 (Advocate)     09 October 2011

You are liable to pay Income tax. Earlier the person who is make gift was liable to pay tax. But now the person who is receiving gift is liable to pay Tax as per IT Act. Please verify

Shailesh Kr. Shah (Advocate)     09 October 2011

I am not agree with Mr. Jolly James.
 

Jolly James 9447287658 (Advocate)     09 October 2011

GIFT TAX -TAX ON GIFT BUDGET 2010

HOME LOAN----PERSONAL LOAN----HEALTH INSURANCE----E TDS SOFTWARE FREE TRAIL

High Value Gifts were a safe haven to show one’s love to others financially. Now the tax man has tightened (putting it mildly) the strings attached to gifts. In fact the rule has become so tight that it may be the end for all high value gifts in India.


Gift Tax Earlier
Since 1998, there is no Gift Tax per say in India. The gift is added to the income of the receiver and is taxed accordingly. Earlier (prior to October 1st 2009), gifts in kind (a car or a house) were not considered at the cash value.
Also all gifts received at the time of marriage were exempt from tax. The gifts could have been from anyone and of any type. This made very high value gifts the norm at the marriages of very rich people. The taxman was hoodwinked by making marriages occasions for large scale conversion of illegal money (black money) into legal gifts.


The New Rule
The change in the rule related to gifts says that the receiver has to pay tax for receiving any gift valued at Rs.50,000 and more. The ‘any gift’ clause means that not only cash but all gifts of any value. So if someone receives a gift of a house worth Rs.30 lakhs, then he/she is automatically in the highest income bracket and has to pay 30% + surcharge on value of the house as tax (close to Rs.10 lakhs in this case).
The rule thus effectively prevents money laundering in the guise of high value gifts.

Which Donors’ Gifts are Exempt

Anumita Sarkar (Tax Advisor/Litigator)     09 October 2011

i am in very much doubt with the advice given by advocate James. Sir, with due respect can you please explain with provisions and case laws, that how the donee is liable to pay tax under income tax act?

 

Thanks !

regards,

A.sarkar
 

Shailesh Kr. Shah (Advocate)     09 October 2011

Exact full information gift is here:-

Gifts under section 56(2)(vii) of the Income Tax Act, 1961
(For gifts received on or after 01.10.2009)
From 1.10.2009, new clause [Sec. 56(2)(vii)] introduced for charging of Gifts received
by individual/HUF. Earlier, only gifts received in the sum of money was chargeable
under Income Tax Act. However w.e.f. 01.10.2009 gift received in kind is also
chargeable subject to certain conditions.
The new provisions is described as under :
I. If any sum of money received without consideration, the aggregate of which
exceeds Rs.50,000, the whole of such sum will be chargeable.
II. If any immovable property received –
(a) without consideration, the stamp duty value of which exceeds Rs.50,000,
the stamp duty value of such property will be chargeable.
(b) For a consideration, which is less than stamp duty value of property by an
amount exceeding Rs.50,000, the stamp duty value of such property as
exceeds such consideration will be chargeable.
III. if any property other than immovable property received –
(a) without consideration, the aggregate fair market value (FMV) of which
exceeds Rs.50,000, the whole of aggregate FMV of such property will be
chargeable.
(b) For a consideration, which is less than the aggregate FMV by an amount
exceeding Rs.50,000, the aggregate FMV as exceeds such consideration
will be chargeable.
However any such gifts received from relatives shall not be treated as income.
For the purpose of this, ‘relative’ means : ‐
(a) spouse of the Individual;
(b) brother or sister of the individual;
(c) brother or sister of the spouse of the individual;
(d) brother or sister of the either of the parents of the individual;
(e) any lineal ascendant or descendant of the individual;
(f) any lineal ascendant or descendant of the spouse of the individual;
(g) spouse of the person referred to in clause (ii) to (vi).

Shailesh Kr. Shah (Advocate)     09 October 2011

Mr. Jolly James didn't provide full information.

Jolly James 9447287658 (Advocate)     09 October 2011

 

F.—Income from other sources

Income from other sources.

 64 56. (1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head “Income from other sources”, if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E.

(2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head “Income from other sources”, namely :—

           (i)  dividends ;

     65 [(ia)  income referred to in sub-clause (viii) of clause (24) of section 2 ;]

     66 [(ib)  income referred to in sub-clause (ix) of clause (24) of section 2 ;]

      67 [(ic)  income referred to in sub-clause (x) of clause (24) of section 2, if such income is not chargeable to income-tax under the head “Profits and gains of business or profession” ;]

     68 [(id)  income by way of interest on securities, if the income is not chargeable to income-tax under the head “Profits and gains of business or profession” ;]

          (ii)  income from machinery, plant or furniture belonging to the assessee and let on hire, if the income is not chargeable to income-tax under the head “Profits and gains of business or profession”;

         (iii)  where an assessee lets on hire machinery, plant or furniture belonging to him and also buildings, and the letting of the buildings is inseparable from the letting of the said machinery, plant or furniture, the income from such letting, if it is not chargeable to income-tax under the head “Profits and gains of business or profession”;

      69 [(iv)  income referred to in sub-clause (xi) of clause (24) of section 2, if such income is not chargeable to income-tax under the head “Profits and gains of business or profession” or under the head “Salaries”;]

       70 [(v)  where any sum of money exceeding twenty-five thousand rupees is received without consideration by an individual or a Hindu undivided family from any person on or after the 1st day of September, 2004 71 [but before the 1st day of April, 2006], the whole of such sum :

                Provided that this clause shall not apply to any sum of money received—

      (a)  from any relative; or

      (b)  on the occasion of the marriage of the individual; or

      (c)  under a will or by way of inheritance; or

      (d)  in contemplation of death of the payer; or

   72 [(e)  from any local authority as defined in the Explanation to clause (20) of section 10; or

       (f)  from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or

      (g)  from any trust or institution registered under section 12AA.]

                Explanation.—For the purposes of this clause, “relative” means—

       (i)  spouse of the individual;

      (ii)  brother or sister of the individual;

     (iii)  brother or sister of the spouse of the individual;

     (iv)  brother or sister of either of the parents of the individual;

      (v)  any lineal ascendant or descendant of the individual;

     (vi)  any lineal ascendant or descendant of the spouse of the individual;

    (vii)  spouse of the person referred to in clauses (ii) to (vi);]

      73 [(vi) where any sum of money, the aggregate value of which exceeds fifty thousand rupees, is received without consideration, by an individual or a Hindu undivided family, in any previous year from any person or persons on or after the 1st day of April, 2006 74 [but before the 1st day of October, 2009], the whole of the aggregate value of such sum:

                Provided that this clause shall not apply to any sum of money received—

      (a)  from any relative; or

      (b)  on the occasion of the marriage of the individual; or

      (c)  under a will or by way of inheritance; or

      (d)  in contemplation of death of the payer; or

      (e)  from any local authority as defined in the Explanation to clause (20) of section 10; or

       (f)  from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or

      (g)  from any trust or institution registered under section 12AA.

                Explanation.—For the purposes of this clause, “relative” means—

       (i)  spouse of the individual;

      (ii)  brother or sister of the individual;

     (iii)  brother or sister of the spouse of the individual;

     (iv)  brother or sister of either of the parents of the individual;

      (v)  any lineal ascendant or descendant of the individual;

     (vi)  any lineal ascendant or descendant of the spouse of the individual;

    (vii)  spouse of the person referred to in clauses (ii) to (vi);]

     75 [(vii)  where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009,—

      (a)  any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum;

 76 [(b)  any immovable property, without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;]

      (c)  any property, other than immovable property,—

       (i)  without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property;

      (ii)  for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration :

                Provided that where the stamp duty value of immovable property as referred to in sub-clause (b) is disputed by the assessee on grounds mentioned in sub-section (2) of section 50C, the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of section 50C and sub-section (15) of section 155 shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of sub-clause (b) as they apply for valuation of capital asset under those sections :

                Provided further that this clause shall not apply to any sum of money or any property received—

      (a)  from any relative; or

      (b)  on the occasion of the marriage of the individual; or

      (c)  under a will or by way of inheritance; or

      (d)  in contemplation of death of the payer or donor, as the case may be; or

      (e)  from any local authority as defined in the Explanation to clause (20) of section 10; or

       (f)  from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or

      (g)  from any trust or institution registered under section 12AA.

                Explanation.—For the purposes of this clause,—

      (a)  “assessable” shall have the meaning assigned to it in the Explanation 2 to sub-section (2) of section 50C;

      (b)  “fair market value” of a property, other than an immovable property, means the value determined in accordance with the method as may be prescribed 77 ;

      (c)  “jewellery” shall have the meaning assigned to it in the Explanation to sub-clause (ii) of clause (14) of section 2;

      (d)  “property” 78 [means the following capital asset of the assessee, namely:—]

       (i)  immovable property being land or building or both;

      (ii)  shares and securities;

     (iii)  jewellery;

     (iv)  archaeological collections;

      (v)  drawings;

     (vi)  paintings;

    (vii)  sculptures; 79 [***]

   (viii)  any work of art; 80 [or]

 80 [(ix)  bullion;]

      (e)  “relative” shall have the meaning assigned to it in the Explanation to clause (vi) of sub-section (2) of this section;

       (f)  “stamp duty value” means the value adopted or assessed or assessable by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property;]

   81 [(viia)  where a firm or a company not being a company in which the public are substantially interested, receives, in any previous year, from any person or persons, on or after the 1st day of June, 2010, any property, being shares of a company not being a company in which the public are substantially interested,—

       (i)  without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property;

      (ii)  for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration :

                Provided that this clause shall not apply to any such property received by way of a transaction not regarded as transfer under clause (via) or clause (vic) or clause (vicb) or clause (vid) or clause (vii) of section 47.

                Explanation.—For the purposes of this clause, “fair market value” of a property, being shares of a company not being a company in which the public are substantially interested, shall have the meaning assigned to it in the Explanation to clause (vii);]

    82 [(viii)  income by way of interest received on compensation or on enhanced compensation referred to in clause (b) of section 145A.]

 I agree with Mr.Shailesh

ramesh (profession)     10 October 2011

GIFT RECEIVED FROM BLOOD RELATION IS NOT TAXABLE UNDER I T ACT , BLOOD RELATION MEANS THE PERSON ACENDING  & DECENDING ( MOTHER , FATHER , BROTHER, SISTER ) HERE GIFT RECEIVED FROM OWN MOTHER . SO NO GIFT TAX or CAPITAL GAIN AT THE TIME OF SELLING OF THE PROPERTY.


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