Till last year if one has received a dazzling jewellery — say worth As 2 lakhs from a friend or a non-relative, he would not be liable to pay tax. But, from 1-10-2009, one is liable to pay tax on receipt of any property (movable or immovable) or cash received from non-relatives.
From 1-10-2009 any property received from a non-relative where the value is in excess of Rs 50,000 in a particular year will be considered as income in the hands of the recipient.
Earlier, gifts in the form of cash from non- relatives were exempted upto a limit of Rs. 50,000 a year (if sum exceeds Rs. 50,000, then entire amount is eligible for being taxed). While this limit remains unchanged, the key change proposed is aimed at bringing in non-cash gifts into the tax ambit. Earlier, gifts in non-cash form (like shares and securities, jewellery, archeological collections, paintings and gold), even if they were in excess of As 50,000, were exempt from any tax in the hands of the recipient.
In case of immovable property, the value as determined by the stamp duty ready reckoner will be considered for tax purposes.
In case of transactions involving immovable property but wherein a consideration is involved, the amount eligible for being taxed would be the difference between the stamp duty and the consideration paid (for other movable property, ‘fair market value’ would be considered as against stamp duty).
Further, the law also provides for certain exceptions. The money/property received in the circumstances mentioned below is not taxed:
- 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.
As per the explanation given under the above section ‘relative’ means:
1) Spouse of the individual.
2) Brother or sister of the individual.
3) Brother or sister of the spouse of the individual.
4) Brother or Sister of either of the Parents
5) Any lineal ascendant or descendant of the individual.
6) Any lineal ascendant or descendant of the spouse of the individual and
7) Spouse of the person referred to in clauses (2) to (6).
It is customary in our country that in certain occasions such as festivals, birthdays or anniversaries, relative and friends give gifts as a token of love and affection. If such cash gifts are of small amounts then there is no botherat ion both for the giver as well as the taker from the taxation angle. If the amount of cash/non-cash gift exceeds Rs.50,000 then the person who receives the gift should know the change in the law mentioned above.
This is because the cash gift is nothing but money received without consideration and accordingly attracts tax liability.
One should also ensure that proper gift deeds are made to avoid legal complications, if any, in future. In any case the tax payers should take advice from their tax consultants before taking any such steps. Those who make or receive such gift or money without consideration should furnish full details in their annual income tax returns.
On wedding day, gift received from anyone (relatives or not) would not fall under “Gift” and not taxable under income tax. Money received under “Will”, by way of inheritance, and benefits from employer for the service to the employee or to the dependent in his absence also will not be treated as Gift taxable under Income Tax. |
