A very common and frequent question running in the mind of taxpayers is the taxability of gifts. In this part, you can gain knowledge about various provisions relating to taxability of gift received by an individual or a Hindu Undivided Family (HUF) i.e. sum of money or property received by an individual or a HUF without consideration or a case in which the property is acquired for inadequate consideration.
From the taxation point of view, gift can be classified as follows:
- Any sum of money received without consideration, it can be termed as ‘monetary gift’.
- Specified movable properties received without consideration, it can be termed as ‘gift of movable property’.
- Specified movable properties received at a reduced price (i.e. for inadequate consideration), it can be termed as ‘movable property received for less than its fair market value’.
- Immovable properties received without consideration, it can be termed as ‘gift of immovable property’.
- Immovable properties acquired at a reduced price (i.e. for inadequate
consideration), it can be termed as ‘immovable property received for less than its stamp duty value’.
Generally, gifts received are not regarded as Income chargeable to tax.
However, by virtue of section 2(24)(xiii) r.w.s. 56(2) any sum of money exceeding Rs. 50,000 received without consideration by an individual or an HUF from any person is chargeable to tax as Income under the head Other Sources, subject to following exceptions:
- Receipts at the time of Marriage.
- Receipts from Relative. (Refer Chart at the bottom)
- Receipts by way of Inheritances or by will
- Receipts Contemplation of Death
- Receipts from Local Authority u/s. 10(20)
- Receipts from Charitable Trust registered u/s. 12AA
- Receipts from fund/foundation/institution/hospital/medical institution referred in Sec. 10(23C)
- Receipt by a fund/foundation/hospital/medical institutions referred to in sub-clauses (iv), (v), (vi) and (via) of Sec. 10(23C)
- Receipts from certain specified restructuring (mentioned later)
- Receipts from a private trust created solely for the benefit of his relatives.
List of Property (to be treated as Gift)
- Immovable property being land or building or both;
- Shares and securities;
- Jewellery;
- Archaeological collections;
- Drawings;
- Paintings;
- Sculptures;
- Any work of art;
- Bullion (w.e.f. 1-6-2010)
Section 56(2) has been further amended and w.e.f. 1-4-2017, the scope of taxation on gifts is increased by taxing gifts in case of all the persons instead of the specified ones mentioned in 56(2)(vii) [S. 56(2)(x)]
| Earlier | Now | ||
| Sections 56(2)(vii) & (viia) | Section 56(2)(x) | ||
| Applicable only in case of individual, HUF; Firm and Co. in certain cases, wherein, receipt of sum of money or property without or inadequate consideration in excess of ? 50,000/- shall be chargeable to tax under income from other sources. | This Section is newly inserted, wherein, any person receiving sum of money or property without or inadequate consideration in excess of ? 50,000/- shall be chargeable to tax under income from other sources |
Gift of more than Rs 50,000/- can be received from below mentioned relatives without any taxes
Taxation of Gift – Click to Read Detailed Summary with Examples
Exemptions from gift tax
As mentioned above, certain specified gifts received by any person from any person(s) attract gift tax. However, here are some exceptions to this.
| Category of donee (recipient of gift) | Category of donor | Occasion covered |
| Individual (It may be relevant to note here that while a gift from a defined relative is not taxable for the donee, income from such gifts may in some cases taxable in the hands of the donor itself – For example, clubbing provisions, deemed owner concept in the house property, etc) | Relative – spouse, brother and sister of self and spouse, brother or sister of parents or parents-in-law, any lineal ascendant or descendant of self or spouse, spouse of any of the relatives mentioned here. | NA |
| Individual | Any person | Marriage of Individual |
| Any person | Any person | Under a will or by way of inheritance |
| Any person | Individual | In contemplation of death of donor or payer |
| Any person | Local authority – Panchayat, Municipality, Municipal Committee and District Board, Cantonment Board | NA |
| Any person | from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to Section 10(23C) | NA |
| Any person | Any charitable or religious trust registered under section 12A or section 12AA | NA |
| Any fund or trust or institution or any university or other educational institution or any hospital or other medical institution established for charitable/religious/educational /philanthropic purpose and approved by the prescribed authority. [Refer Section 10(23C) (iv) (v) (vi) and (via)] | Any person | NA |
| Members of HUF | HUF | Any distribution of capital assets on total or partial partition of a HUF |
| Trust created or established solely for the benefit of the relative of the Individual | Individual | NA |
General caution: Due to extensive tax planning using gifts, gifts in India generally fall under the scrutiny of the tax department, especially if the quantum is huge. Hence, it may be advisable to maintain documentation to establish the genuineness of the gift received and sufficient source of funds with the donor to justify the gift.
The provisions relating to gift tax have been dealt with under Section 56(2)(x) of the Income Tax Act, 1961. These provisions have been briefly captured in the form of the table below:
| Kind of gift covered | Monetary threshold | Quantum taxable |
| Any sum of money without consideration | Sum > 50,000 | Entire sum of money received |
| Any immovable property such as land, building, etc. without consideration | Stamp duty value* > Rs 50,000 | Stamp duty value of the property |
| Any immovable property for inadequate consideration | Stamp duty value* exceeds consideration by > Rs 50,000 | Stamp duty value Minus consideration Example 1:Stamp duty value Rs 2,00,000 Consideration Rs 75,000. The taxable amount is Rs 1.25 lakh (stamp duty value exceeds consideration by > Rs 50,000) Example 2 In Example 1, if consideration is Rs 1,60,000, the taxable gift is Nil as stamp duty value does not exceed consideration by > Rs 50,000 |
| Any property (jewellery, shares, drawings, etc.) other than an immovable property without consideration | Fair market value *(FMV) > Rs 50,000 | FMV of such property |
| Any property other than immovable property for a consideration | FMV exceeds consideration by > Rs 50,000 | FMV Minus consideration (Same example in case of immovable property can be referred) |
*Value adopted by stamp duty authority for the purpose of stamp duty
Taxation of Gift – Click to Read Detailed Summary with Examples
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