TAXABILITY OF GIFTS UNDER THE INCOME TAX ACT, 1961

Gift tax was introduced in India in the year 1958 and continued for more than 40 years. The
provisions relating to tax on such receipts have travelled as under:

Period Taxability
Up to 30-9-1998 Liable for tax as gift under the Gift Tax Act in the hands of the
donor if amount of gift exceeded Rs. 30,000 in a year
1-10-1998 to 31-8-2004 No tax on such sum

1-9-2004 to 31-3-2006
1-4-2006 to 30-9-2009
1-10-2009 onwards
Taxable u/s 56(2)(v) as income but only sum of money if the same
exceeds Rs. 25,000 from each person
Taxable u/s 56(2)(vi) as income but only sum of money if same
exceeded in aggregate Rs. 50,000 in a year in the hands of the
recipient from all donors
Taxable Receipt of sum of Money, Immovable property as well as
certain specified movable property if the amount exceeds
aggregating Rs.50,000 in case of each of such category of assets

MEANING OF GIFT

Gift is the transfer of certain existing movable or immovable property made voluntarily and
without consideration, by the donor to the done and accepted by or on behalf of donee during the
lifetime of the donor.

Therefore, the essential elements of a gift are:

1. Donor
2. Donee
3. Subject Matter
4. Transfer
5. Voluntarily and without consideration and
6. Acceptance.

Chargeability of Gift under the income tax act:

At present a gift is chargeable to tax under section 56 (2) (vii) if it satisfiesthe following
conditions:

A. It is received by an individual or a HUF.

B. If it is received on or after 1st October, 2009.
C. The gift falls in any of the following five categories.
D. The gift does not fall in the exempted category.
FIVE CATEGORIES

Different Categories Tax Treatment Single transaction or

aggregate transactions
examined for the limit of
Rs 50000 during the Year

1. Any sum of money (gift in If Aggregate amount >Rs50000 All transactions

cash or by cheque or draft)
Whole amt chargeable to tax

2. Immovable property If Stamp duty value >Rs. 50,000/-, Single transaction

without consideration
stamp duty value chargeable to tax in
every such transaction.

3. Immovable property for a Nothing will be chargeable to tax.

consideration which is less Provisions of section 56(2)(vii) will not
than the stamp value be attracted.( Section 50 C will be
attracted)

4. Movable property without If Aggre fair mkt value >Rs50000 All transactions
consideration exceeds Rs. whole of FMV chargeable to
tax.

5. Movable property for a If (Aggregate FMV- Consideration) > Rs All transactions

consideration which is less 50000 .
than the fair market value
Difference is chargeable to tax.

* Movable property means: -Shares and securities ,jewellery; archaeological collections; drawings;
paintings; sculptures; or any work of art; or bullion
EXEMPTED CATEGORY:

1. Money / Property from a relative

2. Money / Property received on the occasion of the marriage of the individual.
3. Money / Property received by way of will / inheritance.
4. Money / Property received in contemplation of death of the payer.
5. Money / Property received from a local authority
6. Money / Property received from any fund, foundation, university, other
educational institution, hospital, medical institution, any trust or institution referred
to in section 10(23C).
7. Money received from a trust or charitable institution registered under section
12AA.

Meaning of Relative:

O ther
A ll A s c endants
A s c endants

B rother and B rother and

s is ters of M r Father of M r X M other of M r X s is ters of M r
X ’s Father X ’s M other

B rother of M r B rother of M rs
Mr X S is ter of M r X M rs. X S is ter of M rs X
X X

A ll A ll
D ec endants D ec endants

Including Spouse of all

VALUATION METHOD
 PROPERTY VALUATION METHOD

i) Immovable property Stamp duty value

ii) Movable Property Fair Market Value

a) Jewellery Price at which it can be sold in the open market or

Invoice value if purchased on date of receipt/valuation or

Value as reported by the registered valuer on valuation date

b) Archaeological Price at which it can be sold in the open market or

collections;
drawings; paintings; Invoice value if purchased on date of receipt/valuation or
sculptures; or any Value as reported by the registered valuer on valuation date
work of art;

c) Quoted shares and Value recorded in the Recognized stock exchange

securities( recd by
way of transaction
carried out through
a recognized stock
exchange)

d) Quoted shares and Lowest price of such shares or securities quoted on any
securities(not recd recognized stock exchange on valuation date
by way of
transaction carried
out through a
recognized stock
exchange)

e) Unquoted equity (Assets-Liabilities) X PV/ PE

shares
PV= Total paid up equity share capital as per B/s

PE= Paid up value of such equity shares

f) Other Unquoted Price at which it can be sold in the open market and assessee may
shares or securities obtain report from Class I merchant banker or a C.A. in respect of
such valuation.

SYNOPSIS OF TAXABILITY OF GIFT OR PURCHASE OF ASSETS FOR INADEQUATE

CONSIDERATION

Any sum of Money upto
Rs.50,000/- without
consideration
Any sum of Money
Exceeding Rs.50,000/-
Without consideration
Immovable property without
consideration, if the stamp
value exceeds Rs.50,000/-
Immovable property for a
consideration, if the stamp
value exceeds the
consideration by Rs.50,001/-
INDIVIDUAL/HUF COMPANY @ /FIRM
UPTO 30/09/2009 ON & FROM 01/10/2009 UPTO 31/05/2010 ON & FROM
01/06/2010
Not taxable Not taxable Not taxable Not taxable
a) Non Taxable if a) Non Taxable if received Not taxable Not taxable
received from from relatives/entities as
relatives/entities as specified u/s 56(vii) or on
specified u/s 56(vi) occasion of marriage of the
or on occasion of donee or under Will or by
marriage of the inheritance
donee or under Will
or by inheritance
b) Taxable if b) Taxable if received Not taxable
received from from persons other than
persons other than relatives/entities as
relatives/entities as specified u/s 56(vii)
specified u/s 56(vi)
Not taxable a) Non Taxable if received Not taxable Not taxable
from relatives/entities as
specified u/s 56(vii) or on
occasion of marriage of the
donee or under Will or by
inheritance
b) Taxable if received
from persons other than
relatives/entities as
specified u/s 56(vii)
Not taxable Not taxable Not taxable Not taxable
 INDIVIDUAL/ HUF COMPANY @ /FIRM [Sec56(2)(viia)]

UPTO 30/09/2009 ON & FROM 01/10/2009 UPTO 31/05/2010 ON & FROM

01/06/2010

Any property *other than
immovable property without
consideration, if the fair
market value exceeds
Rs.50,000/-
Not taxable a) Non Taxable if received Not taxable Fair Market Value is
from relatives/entities as Taxable
specified u/s 56(vii) or on
occasion of marriage of the
donee or under Will or by
inheritance

b) Taxable if received
from persons other than
relatives/entities as
specified u/s 56(vii)

Any property *other than
immovable property for a
consideration, if the fair
market value exceeds
Rs.50,001/-
Not taxable a) Non Taxable if Not taxable Fair Market Value Less
purchased from Actual consideration is
relatives/entities as Taxable if such
specified u/s 56(vii) difference exceeds
Rs.50,000/-
b) Fair Market Value Less
Actual consideration is
Taxable if purchased from
persons other than
relatives/entities as
specified u/s 56(vii)

@ Company means a company other than one in which the public is substantially interested.

* Property means

• in case of individual/HUF ; - Shares and Securities, jewellery, archaeological collection,

drawings, paintings, sculptures, work of art, bullion.
• In case of Company/Firm :- Shares of a company other than one in which the public is
substantially interested.