Introduction-
Gift Tax Limits and their Exemption-Gifts are exchanged in India on each and every occasion, celebration or religious functions. Question that comes in mind whether this gift amount is tax exempted or not. Is there any limit on amount of gifts which is exempted from tax?
Yes, there is gift tax but depending upon terms and conditions.
No gift tax is applicable where gifts are received from relative. There is no limit on this amount.
Gifts received from non relatives for amount > Rs.50000 in any financial year comes under levy of TAX.
However there are some exemptions:
1. Gift received from Relatives -
Gift received from relative (close or blood relative) is no taxable in hands of recipient under section 56 of Income Tax Act. All gifts received from relatives (irrespective of value) are exempted from Gift Tax. The persons who are considered as relatives:
In case of Individual-
- Spouse of the individual
- Brother or sister of the individual
- Brother or sister of the spouse of the individual
- Brother or sister of either of the parents of the individual
- Any lineal ascendant or descendant of the individual
- Any lineal ascendant or descendant of the spouse of the individual
- Spouse of the person referred to in above points
In case of HUF
2. On the occasion of Marriage of the Individual -
All Gifts received by an individual or his spouse on their marriage are fully exempted from Gift Tax. There is no limit.
3. By way of will or inheritance or contemplation of death of the payer -
Any amount received under a will or by way of inheritance or contemplation of death of the payer is fully exempt in the hands of the person receiving the gift. There is no limit.
4. Gift from Local Authorities -
Any Gifts received from any local authority as defined u/s 10(20).
5. Educational Institution, Trust or Others -
Gift received from any fund or foundation as specified in section 10(23C) or trust/institution registered under section 12AA.
6. Aggregate value of gift less than Rs. 50,000-
Any Gift received (in Cash or in Kind) from other than relatives does not exceed Rs. 50,000/- in any financial year exempt from Gift Tax. If the value of gifts exceed Rs. 50,000/- then the entire gift amount is taxable.
Non Resident Indian:
- NRI parent, child or relative transfer cash or property as gift, it is not taxable in the hands of the resident recipient.
- Gifts of Immovable property abroad are not taxable.
- Gifts to parents from NRE accounts of children are not taxable.
Movable Assets:
Shares & Securities, Jewellery, Drawings, Paintings, Sculptures etc.
Immovable Assets:
Land, Building or both
Gift Tax on Movable or Immovable Property-
1. Movable Property as gift without consideration-
If any Movable Property is received as gift without paying any consideration amount and the market value of the same is greater than 50,000, the total market value of gift is taxable
2. Movable Property as gift with consideration-
If any Movable Property is received as gift after paying consideration amount and the market value minus consideration amount is greater than 50,000, the balance amount i.e. (Market value minus Consideration amount) is taxable.
3. Immovable Property as gift without consideration-
If any Immovable Property is received as gift without paying any consideration amount and the stamp value of the property is greater than 50,000, the stamp value of gift is taxable.
4. Immovable Property as gift with consideration-
If any Immovable Property is received as gift with paying consideration value and the stamp value minus consideration amount is greater than 50,000, the balance amount i.e. (Stamp value minus consideration amount) is taxable.
Example 1:
Stamp duty value Rs 2,50,000 Consideration Rs 1,00,000.Taxable amount is Rs 1,50,000 because i.e.(stamp duty value minus consideration paid) is greater than Rs. 50,000.
Example 2
Stamp duty value Rs 2,50,000 consideration is Rs 2,20,000. Taxable gift is Nil because i.e.(Stamp duty value minus consideration paid) does not exceed Rs 50,000
Points to be remember-