Update Date : 12-Jun-2023

Created Date : 12-Jun-2023

Reference : ET Wealth

One way of sharing your wealth is to give it as a gift to those you care about. However, this can come with tax implications in some cases. ET Wealth lists what you need to keep in mind while making a ‘gift’.
 
 
CATEGORIES OF GIFTS

• Money received by cash, draft, cheque, bank transfer, UPI payments, etc.

• Immovable property like land, buildings, residential or commercial property.
• Movable property such as jewellery, shares, bonds, paintings, sculptures, antique coins, etc.
 
TWO OCCASIONS WHEN GIFTS FROM ANYONE ARE EXEMPT FROM TAX
 
Marriage
Gifts received by an individual from anyone on the occasion of his or her marriage are not taxable. This does not apply to gifts received by the parents or kin of the bride or groom.
 
Inheritance
Monetary gifts or property received under a will or by way of inheritance is not taxable. This will also hold in case someone bequeaths such a gift in contemplation of death (who is terminally ill and expects to die shortly from illness).
 
 
BE AWARE OF CLUBBING PROVISIONS
In some cases, the income generated from a gift may be added to the income of the person giving the gift. Suppose you gift Rs.2 lakh to your spouse or minor child, and they invest it in an FD. Then the interest earned from it will be clubbed with your income and taxed.
 
 
TRANSFER OF PROPERTY
Suppose you transfer any house property to your spouse, you will be deemed to be the owner of the property transferred, and any rental income from it shall be taxable in your hands.
 
 
IF THERE’S A LOSS
Say, you gift your spouse Rs.5 lakh via cheque to invest in their business and they put in an additional Rs.5 lakh. If the business incurs a loss of Rs.2 lakh, you can claim the proportionate loss of Rs.1 lakh in your ITR.
 
 
GIFTS FROM SPECIFIC RELATIVES ARE NOT TAXED…
This is regardless of the amount that is gifted. Such relatives are specified as:
 
 
...BUT GIFTS ABOVE RS.50,000 FROM OTHERS ARE TAXED
If the value of gifts received from non-relatives in a financial year exceeds Rs.50,000, the entire amount is taxable as ‘Income from other sources’.
 
 
IF IT’S MONEY
The aggregate value of gifts is taxable if it is more than Rs.50,000. For instance, A receives a gift from B worth Rs.20,000 and from C worth Rs.40,000. As the aggregate value has crossed the threshold of Rs.50,000, A will have to pay tax on the total amount of Rs.60,000.
 
 
IF IT’S MOVABLE PROPERTY
The fair market value (FMV) of gifts like jewellery, shares, art, bullion, such virtual digital assets etc., above Rs.50,000 will be taxed.
 
The value of such gifts is specified in the tax laws. For instance, in the case of jewellery being gifted, it is the price that the ornaments would fetch if sold in the open market.
 
However, some items are not defined as prescribed movable property under the Income Tax Act and gifting these do not attract any tax, such as a television or a smart phone.
 
 
IF IT’S IMMOVABLE PROPERTY
The stamp duty value of gifted property exceeding Rs.50,000 will be taxable. If A gets a fl at worth Rs.50 lakh (according to circle rates), but pays only Rs.30 lakh for it, the excess Rs.20 lakh would be considered a taxable gift. However, if the difference between the actual value and stamp duty value is less than Rs.50,000, the transfer will not be a taxable gift.
 
The exemption is if the property is received from a foundation, institution, hospital, trust, religious or charitable organisation as defined under Sections 10(20), 10(23C) and 12AA of the Income Tax Act.

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