Taxability of Gift

Under the Income Tax Law, transfer of any property (movable or immovable) is subject to capital gain tax. However, if the transfer qualifies as a “Gift”, then the same shall not be considered as taxable transfer for the Tax purposes. There is no definition for ‘gift’ provided in the Tax Law. However, based on judicial precedents, the following criteria essential for a transaction to qualify as ‘Gift’:

  • The transfer must be made voluntarily by the Donor / Transferor; and
  • The Transfer must be made without consideration 

Though the term ‘gift’ is commonly understood as between natural persons on account of natural love and affection, the Income Tax Act covers gift transactions even between any persons (including corporates).

Now, the question arise whether a gift is income in the hands of recipient. Gift, in the hands of Donee, ordinarily represents capital receipt and is not of income nature. However, there is an exception in the Indian tax law to consider certain gift transactions are considered as taxable income in the hands of Donee (the person who accepts the gift).

The Income Tax Act provides the following transaction value would be subject to tax in the hands of recipient (donee) as income from other sources if he received without consideration or for inadequate consideration: 

Subject Assets
Threshold Value (in INR)
Taxable Value
Any sum of money (Cash)
 50,000
Whole sum of money
Any Immovable Property
Without consideration
Stamp Duty Value (‘SDV’) exceeds 50,000 
Whole SDV
Any Immovable Property
For Inadequate consideration
If consideration is less than SDV and the difference is more than aggregate of INR 50,000 and 5% of consideration
Excess of SDV over consideration 
Any Property (other than immovable Property)
Without consideration
Fair Market Value (FMV) exceeds 50,000
Whole FMV
Any Property (other than immovable Property)
For Inadequate consideration
If consideration is less than FMV and the difference is more than INR 50,000
 Excess of FMV over consideration 
Exclusions

Above taxation system shall not be applicable if the person (individual) receive such money or property in the following occasions / from person:

  • From any relative.
  • On the occasion of the marriage of the individual.
  • Under a will or by way of inheritance.
  • In contemplation of death of the payer or donor, as the case may be.


Disclaimer: The views / the analysis contained therein do not constitute a legal opinion and is not intended to be an advice. Readers of this document are advised to seek their own professional advice before taking any course of action or decision, based on this document.

Stay updated on Tax Information

Ask your question here & we will get back to you soon