FAQs on Gifts received by an individual or HUF

Are monetary gifts received by an individual or Hindu Undivided Family (HUF) taxable?

If the following conditions are satisfied then any sum of money received (i.e., monetary gift may be received in cash, cheque, draft, etc.) by an individual/ HUF will be charged to tax (*):

o Sum of money received without consideration.

o The aggregate value of such sum of money received during the year exceeds Rs. 50,000.

(*) Refer next FAQ for situations in which sum of money received by an individual or HUF is not charged to tax, i.e., monetary gift is not charged to tax.

Are there any cases in which sum of money received without consideration, i.e., monetary gift received by an individual or HUF is not charged to tax?

If the conditions given in preceding FAQ are satisfied then sum of money received without consideration (i.e., monetary gift) by an individual or HUF will be charged to tax. However, in the following cases monetary gift will not be charged to tax.

o Money received from relatives.
o Money received by a HUF from its members.
o Money received on the occasion of the marriage of the individual.
o Money received under will/ by way of inheritance.
o Money received in contemplation of death of the payer or donor.
o Money received from a local authority as defined under section 10(20) of the Income-tax Act.
o Money received from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in Section 10(23C).
o Money received from a trust or institution registered under section 12AA.
o Gift received from relatives are exempt from tax. Who will be considered as relative for the purpose of claiming such exemption. section 12AA.

Gift received from relatives are exempt from tax. Who will be considered as relative for the purpose of claiming such exemption?

Following persons would be considered as relative

(a) Spouse of the individual;
(b) Brother or sister of the individual;
(c) Brother or sister of the spouse of the individual;
(d) Brother or sister of either of the parents of the individual;
(e) Any lineal ascendant or descendent of the individual;
(f) Any lineal ascendant or descendent of the spouse of the individual;
(g) Spouse of the persons referred to in (b) to (f).

Apart from marriage are there any other occasions in which monetary gift received by an individual will not be charged to tax?

Gift received only on the occasion of marriage of the individual is not charged to tax. Apart from marriage there is no other occasion in which gift received by an individual is not charged to tax. Hence, gift received on occasions like birthday, anniversary, etc. will be charged to tax.

Are monetary gifts received from friends liable to tax?

Gifts received from relatives are not charged to tax. Friend is not a relative as defined in the list and hence, gift received from friends will be charged to tax (if other criteria of taxing gift are satisfied).

Are monetary gifts received from abroad liable to tax?

If the aggregate value of monetary gift received during the year by an individual or HUF exceeds Rs. 50,000 and the gifts are not covered under the exceptions prescribed in the preceding FAQ, then gifts whether received from India or abroad will be charged to tax.

An Individual received different gifts (cash) from his friends, none of the gift exceeded Rs. 50,000 but the total of the gifts received during the year exceeded Rs. 50,000. What will be the tax treatment in such a case?

Sum of money received without consideration by an individual or HUF is chargeable to tax if the aggregate value of such sum received during the year exceeds Rs. 50,000.

The important point to be noted in this regard is the "aggregate value of such sum received during the year". The taxability of the gift is determined on the basis of the aggregate value of gift received during the year and not on the basis of individual gift. Hence, if the aggregate value of gifts received during the year exceeds Rs. 50,000, then aggregate value of such gifts received during the year will be charged to tax.

If the aggregate value of gift received during the year by an individual or HUF exceeds Rs. 50,000, whether total amount of gift will be charged to tax or only the amount in excess of Rs. 50,000 will be charged to tax?

Sum of money received without consideration by an individual or HUF is charged to tax if the aggregate value of such sum received during the year exceeds Rs. 50,000. Once the aggregate value of monetary gift received during the year exceeds Rs. 50,000, then the aggregate value of gift received during the year will be charged to tax.

Are gifts of immovable property received by an individual or HUF charged to tax?

If the following conditions are satisfied then immovable property received by an individual or HUF will be charged to tax (*):

o Immovable property, being land or building or both, is received by an individual/HUF.
o The immovable property is received without consideration (i.e., received as a gift) or for a consideration which is less than the stamp duty value of the property by an amount exceeding Rs.50,000.
o The immovable property is a 'capital asset' within the meaning of section 2(14) for such as individual or HUF.
o The stamp duty value of such immovable property received without consideration exceeds Rs. 50,000.

(*) Refer next FAQ for situations in which immovable property received without consideration (i.e., received as a gift) by an individual or HUF is not charged to tax.

Are there any cases in which the value of immovable property received by an individual or HUF without consideration (i.e. by way of gift) is not charged to tax?

If the conditions given in preceding FAQ are satisfied, then immovable property received by an individual or HUF without consideration (i.e., by way of gift) will be charged to tax. However, in the following cases gift of immovable property will not be charged to tax.

o Property received from relatives.
o Property received by a HUF from its members.
o Property received on the occasion of the marriage of the individual.
o Property received under will/ by way of inheritance.
o Property received in contemplation of death of the donor.
o Property received from a local authority as defined under section 10(20) of the Income-tax Act.
o Property received from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in section 10(23C).
o Property received from a trust or institution registered under section 12AA.

• An individual received gift of three properties from his friend. The value of none of the property exceeded Rs. 50,000, but the aggregate value of these three properties exceeded Rs. 50,000. What will be the tax treatment of gift in this case?

In case of immovable property received without consideration by an individual or HUF, the limit of Rs. 50,000 is to be applied transaction-wise and all immovable properties received as gift during the year are not to be clubbed for applying the limit of Rs. 50,000. Hence, if the total stamp value of immovable properties received as gift during the year exceeds Rs. 50,000 but the stamp value of none of the property exceeds Rs. 50,000, then nothing will be charged to tax.

Are immovable properties received as gift from friends liable to tax?

Gifts received from relatives are not charged to tax. Relative for this purpose means:

(a) Spouse of the individual;
(b) Brother or sister of the individual;
(c) Brother or sister of the spouse of the individual;
(d) Brother or sister of either of the parents of the individual;
(e) Any lineal ascendant or descendent of the individual;
(f) Any lineal ascendant or descendent of the spouse of the individual;
(g) Spouse of the persons referred to in (b) to (f).

Friend is not a relative as defined in the above list and hence, gift received from friends will be charged to tax (if other criteria of taxing gift are satisfied).

Are gifts of immovable property located abroad liable to tax?

If the aggregate value of monetary gift received during the year by an individual or HUF exceeds Rs. 50,000 and the gifts are not covered under the exceptions prescribed in the preceding FAQ, then gifts whether received from India or abroad will be charged to tax.

An Individual received gift of a flat from his friend. The stamp duty value of the flat is Rs. 84,000. In this case whether the total value of gifted property will be charged to tax or only the value in excess of Rs. 50,000 will be charged to tax?

If the conditions discussed in earlier FAQ (regarding the taxability of gift of immovable property) are satisfied, then the entire value of immovable property received without consideration, i.e., received as gift will be charged to tax. Once the taxability is attracted, i.e., value of property received as gift exceeds Rs. 50,000 then the entire value of the property is chargeable to tax. Hence, in this case entire value of property, i.e., Rs. 84,000 will be charged to tax.

Would any taxability arise if an immovable property is received for less than its stamp duty value?

Apart from taxing immovable property received without consideration, i.e., received as gift, the Income-tax Law has also designed the provisions for taxing immovable property received for less than its stamp duty value. If following conditions are satisfied, then immovable property received by an individual or HUF for less than its stamp duty value will be charged to tax (*):

o Any immovable property is acquired by an individual or a HUF.

o The immovable property is a 'capital asset' within the meaning of section 2(14)of the Act for such individual or HUF.

o Such property is acquired for a consideration but the consideration is less than the stamp duty value and the difference exceeds Rs. 50,000.

In above case the excess of stamp duty value over the purchase price of the property will be treated as income of the purchaser.

(*) Refer next FAQ for situations in which value of immovable property received for less then its stamp duty value is not charged to tax.

Are there any cases in which immovable property received by an individual or HUF for less than its stamp duty value is not charged to tax?

If the conditions given in preceding FAQ are satisfied, then immovable property received (i.e. acquired) by an individual or HUF for less than its stamp duty value is charged to tax. However, in the following cases nothing will be charged to tax in respect of immovable property received for less than its stamp duty value :

o Property received from relatives.
o Property received by a HUF from its members.
o Property received on the occasion of the marriage of the individual.
o Property received under will/ by way of inheritance.
o Property received in contemplation of death of the donor.
o Property received from a local authority as defined under section 10(20) of the Income-tax Act).
o Property received from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in section 10(23C).
o Property received from a trust or institution registered under section 12AA.

Are gifts of movable property received by an individual or HUF charged to tax?

If the following conditions are satisfied then value prescribed for movable property (*) received by an individual or HUF will be charged to tax:

o Prescribed movable property is received without consideration (i.e., received as gift).

o The aggregate fair market value of such property received by the taxpayer during the year exceeds Rs. 50,000

In above case, the fair market value of the prescribed movable property will be treated as income of the receiver.

(*) Prescribed movable property means shares/securities, jewellery, archaeological collections, drawings, paintings, sculptures or any work of art and bullion, being capital asset of the taxpayer.

Considering the above definition, nothing will be charged to tax in respect of gift of any item being a movable property other than covered in the above definition, e.g., Nothing will be charged to tax in respect of a television set received as gift, because a television set is not covered in the definition of prescribed movable property.

($) Refer next FAQ for situations in which prescribed movable property received without consideration by an individual or HUF, i.e., received as gift is not charged to tax.

Are there any cases in which the value of prescribed movable property received without consideration, i.e., received as gift by an individual or HUF is not charged to tax?

If the conditions given in preceding FAQ are satisfied, then value of prescribed movable property received without consideration, i.e., received as gift by an individual or HUF is charged to tax. However, in the following cases nothing will be charged to tax in respect of prescribed movable property received without consideration:

o Property received from relatives.
o Property received by a HUF from its members.
o Property received on the occasion of the marriage of the individual.
o Property received under will/ by way of inheritance.
o Property received in contemplation of death of the donor.
o Property received from a local authority as defined under section 10(20) of the Income-tax Act).
o Property received from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in section 10(23C).
o Property received from a trust or institution registered under section 12AA.
o Any shares received by an individual or HUF, as a consequence of business re-organisation of co-operative bank or demerger or amalgamation of a company [as referred to in clause (vicb) or clause (vid) or clause (vii) of Section 47]

An individual received gift of jewellery from his friends. The total value of jewellery received during the year as gift from all the friends amounted to Rs. 84,000. What will be the tax treatment of gift in this case?

If the aggregate fair market value of prescribed movable property received by an individual or HUF without consideration during the year exceeds Rs. 50,000, then the total value of such properties received during the year without consideration will be charged to tax. In this case the total value of jewellery received during the year exceeds Rs. 50,000 and hence, Rs. 84,000 will be charged to tax.

Does any taxability arise if prescribed movable property is received by an individual or HUF for less than its fair market value?

If the following conditions are satisfied then prescribed movable property (*) received by an individual or HUF will be charged to tax ($):

o Prescribed movable property is acquired by an individual or HUF.

o The aggregate fair market value of such properties acquired by the taxpayer during the year exceeds the consideration of these properties by more than Rs. 50,000. In other words, the aggregate fair market value of all such properties is higher than the consideration and the difference is more than Rs. 50,000.

(*) Prescribed movable property means shares/securities, jewellery, archaeological collections, drawings, paintings, sculptures or any work of art and bullion, being capital asset of the taxpayer.

Considering the above definition, nothing will be charged to tax if any movable property (other than those covered in the above definition) is received for less than its fair market value e.g., Nothing will be charged to tax in respect of a television set received for less than its fair market value because a television set is not covered in the definition of prescribed movable property.

($) Refer next FAQ for situations in which prescribed movable property received for less than its fair market value is not charged to tax.

Are there any cases in which prescribed movable property received for less than its fair market value by an individual or HUF is not charged to tax?

If the conditions given in preceding FAQ are satisfied, then prescribed movable property received (i.e. acquired) by an individual or HUF for less than its fair market value is chargeable to tax. However, in the following cases nothing will be charged to tax in respect of prescribed movable property received for less than its fair market value:

o Property received from relatives (*).
o Property received by a HUF from its members.
o Property received on the occasion of the marriage of the individual.
o Property received under will/ by way of inheritance.
o Property received in contemplation of death of the donor.
o Property received from a local authority as defined under section 10(20) of the Income-tax Act.
o Property received from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in section 10(23C).
o Property received from a trust or institution registered under section 12AA.

(*) Relative for this purpose means:

(a) Spouse of the individual;
(b) Brother or sister of the individual;
(c) Brother or sister of the spouse of the individual;
(d) Brother or sister of either of the parents of the individual;
(e) Any lineal ascendant or descendent of the individual;
(f) Any lineal ascendant or descendent of the spouse of the individual;
(g) Spouse of the persons referred to in (b) to (f).

[As amended up to Finance Act, 2017]

Source- Incometaxindia.gov.in