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Gift tax

rohit choudhary (consultancy) (42 Points)

22 August 2012

cash gift of 10lakh given to spouce .wether there is any provision of income tax applicable on it

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3 Replies

Chiradeep.R.H (Chirahi & Associates - Consultants) (240 Points)
Replied 22 August 2012

Gifts received From Relatives

As per the Income tax act, the Gifts received from any of your relatives are fully exempt from tax. Whether you are received the gifts as Cash, Cheque or any goods. You are not liable to pay the tax for these gifts. Here the “relatives” term defines by the Income Tax act as follows :

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 clauses (ii) to (vi). For example if you are receiving gift of Rs.100000 from your uncle ( your mother’s brother), it is fully exempt from the Tax. Whenever you get the gifts please apply the relations in the above list to ascertain whether you are liable to pay any tax for the received gift.

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CA. Subhash Dangi (Chartered Accountant) (1784 Points)
Replied 22 August 2012

Gifts from relatives are tax-exempt

Importantly, the provisions of the aforesaid Section 56(2)(vi) applicable to the taxation of gifts in excess of Rs. 50,000 in a financial year in the aggregate are applicable for gifts received from non-relatives. Thus, any gift from relatives of any amount during the financial year is completely exempt from tax. Therefore, it’s crucial to know the meaning of the expression “relative” for this purpose. The explanation to Section 56(2)(vi) provides that the expression “relative” means:

i.Spouse of the individual;

ii.Brother or sister of the individual;

iii. Brother or sister of the spouse of the individual;

iv.Brother or sister of either of the parents of the individual;

v.Any lineal ascendant or descendant of the individual;

vi.Any lineal ascendant or descendant of the spouse of the individual; and

vii.Spouse of the person referred to in clauses (ii) to (vi).

Thus, a gift received by an individual from his spouse, or from his brother or sister, or from the spouse’s brother or sister, parents, or from any lineal ascendant or descendant of oneself or one’s spouse would normally be fully tax-exempt. Similarly, any gifts of any amount whatsoever received from the spouses of any of these persons would also be completely exempt from income tax.

For example, if Mr. A receives a gift of Rs. 2 lakh in cash from his maternal uncle, that is, his mother’s brother, it would be exempt since the maternal uncle would be brother of the parent of the individual concerned and would come within clause (iv) of the aforesaid Explanation.

Hence cash gift of 10lakh given to spouce (relative) is exempt under income tax.