Gift Tax: Meaning, Different Gift Tax Rates & Stamp Duty Provisions In India
Individuals exchange gifts as a part of a celebration or during significant events. One gives gifts as a show of respect and empathy towards the other individual. However, gift exchanges also take place as a part of tax planning or tax evasion.
To prohibit evasion and encourage tax planning, the Government of India introduced several provisions and clauses in IT Act to regulate gift tax and oversee gift exchanges.
How are Gifts taxed in India?
The taxation provision relating to gifts was amended in 2017. According to this amendment, tax liability falls on the person receiving gifts from the other person. Gifts come under the head “Income from other sources” in income tax returns. Gifts are taxable at normal rates as per the respective tax slab of an assessee.
What Comes under Gifts for the Purpose of Taxation?
Here is a list of items covered under gifts:
- Any money received by an individual in cash or cheque
- Immovable properties like real estate, land, and building
- Movable assets such as jewellery and shares
Gift Taxation in India
Gift tax is regulated as per Section 56(2)(x) of the IT Act. The given table provides the details of gift taxation in India:
| Type of Gift | Monetary Threshold | Taxable Amount |
| Any sum of money received without consideration | Greater than Rs. 50,000 | Entire amount received |
| Immovable property received, such as buildings and land, without consideration | Whenever the stamp duty amount is greater than Rs. 50,000 | Stamp duty amount of the immovable property |
| Immovable property received for inadequate consideration | Whenever the stamp duty amount exceeds the consideration value by more than Rs. 50,000 | (Stamp duty – consideration amount)For example, the duty value is Rs. 3,00,000 and consideration amount is Rs. 1,00,000. So, the taxable amount is Rs. 2,00,000. Another example: The stamp duty amount is Rs. 90,000 and the consideration amount is Rs. 50,000. No tax is applicable since stamp duty does not exceed consideration by more than Rs. 50,0000 |
| Movable assets like shares, jewellery, etc. received without consideration | The fair market value must be greater than Rs. 50,000 | Fair market value of such assets |
| Assets apart from immovable ones received with consideration amount | Whenever the fair market value exceeds the consideration amount by more than Rs. 50,000 | (FMV – consideration amount received) |
Stamp Duty Provisions
Here are some provisions relating to stamp duty value in case of gift tax as per the IT Act:
- Income Tax Department considers the stamp duty value while determining the gift tax on immovable assets. There may be a situation in which the stamp duty amount is on the higher side due to various reasons. One of such reasons can be the time gap between the agreement fixing the consideration and the actual date of registration of such property.
In such cases, tax authorities can consider the stamp duty value as per the date on which parties finalised the agreement consideration if the following conditions are met:
- The agreement date and property registration dates are different.
- When one pays the consideration value fully or in part through an account payee cheque/demand draft or any electronic payment mode on or before the agreed date
- Now when an assessee has disputed the stamp duty valuation as adopted by the valuation authority as per Section 50C of the Income Tax Act, the Assessing Officer must refer the current valuation to a Valuation Officer (VO). First, the VO must go through the land documents and give a fair hearing chance to the assessee. After that, he/she must pass a final order of stamp duty value. In case the VO comes up with a lower valuation of stamp duty, the tax officer must accept that for the purpose of calculating gift tax.
Also Read: Section 12A of the Income Tax Act: Eligibility And Documents Required
Exemption under Gift Tax
The following exemptions are available with regard to gift tax in India:
- Gifts received by individuals are exempt from taxation whenever the value of gifts is lower than Rs. 50,000. However, when the gift value exceeds Rs. 50,000, the entire corpus becomes taxable. For example, if an individual receives a gift amounting to Rs. 80,000, then the entire amount of Rs. 80,000 is taxable.
- Gifts one receives from some specific relatives are exempt irrespective of the gift amount. These include father, mother, spouse, brother and sister. However, even though the gift itself is exempt from tax, any income generated from such gifts is added to the total income and taxed as per respective slabs.
- Gifts received on account of the marriage of the recipient are subject to tax exemption.
- Gift on account of the will or inheritance deed of the donor is eligible for exemption.
- Property received from an institution or a trust registered u/s 12AA of Income Tax Act is eligible for exemption.
- Property received from Government authority u/s 10(20) of IT Act is exempted.
Final Word
Gift tax in India is applicable on certain receivables and exempt on some receivables. Assessees must carefully understand the guiding principles and utilise gifts as a part of their tax planning process.
FAQs on Gift Tax
Ans: In India, a gift in either cash or kind is subject to taxation. This includes gold, real estate, jewellery, etc. However, when one receives a gift in cash, they are exempt from taxation when the value of such gift is lower than Rs. 50,000.
Ans: Whenever a minor receives a gift, the value of such a gift is taxable only when both his/her parents are earning taxable income. In such a case, the gift amount is added to the income of the parent whose income is the highest.
Ans: NRIs can receive financial assets as gifts from their relatives in India. These include stocks and other securities, given that value of the gift does not exceed 5% of the company’s paid-up capital. Furthermore, note that the sectoral cap must be maintained, and NRIs should be eligible to own such securities.
Ans: Yes, any gift received from an NRI relative is exempt from tax irrespective of the mode of payment of such gifts. Even immovable properties gifted by NRIs are tax-exempt. Whenever a resident receives such a gift, both the giver and receiver can claim tax exemption.
Ans: Finance Minister of India, in her Budget speech, mentioned that any digital asset such as cryptocurrencies and non-fungible tokens gifted by an individual is also eligible for taxation in the hands of the recipient. This provision will come into effect from FY 2022-2023.
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This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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