Article on Gifts Received by an individual or (HUF) Hindu Undivided Family ||Income Tax on Gift Received ||Gift Exempt from tax

Article on Gifts Received by an individual or (HUF) Hindu Undivided Family

Income Tax on Gift Received– Taxability on Gifts Received by an individual or HUF is very common and frequent question running in the mind of person. in this Article, you can gain knowledge about various provisions relating to Income taxability of gift received by an individual or HUF.

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

• Sum of money received without consideration.
• The aggregate value of such sum of money received during the year exceeds 50,000 rupees.

Example:

Mr A friend gift  30000 rupees and another one gift 20000 then there is no need to pay tax, but if such (gift Received) amount exceeds 50000 rupees than whole amount of money will be taxable.

Sum of money received without consideration

​​If any person sum of money is received on or after 01^st October- 2019 by an Individual or HUF without any consideration and the aggregate value of which exceeds 50,000 Rupees during the previous year, then the whole of the aggregate value of such sum is chargeable to Income tax. –

However, in the following cases nothing will be charged to Income tax in respect of any sum of money received by an Individual or Hindu Undivided Family (HUF) without any consideration, if the same is received:​

• from any relative or by a Hindu Undivided Family (HUF) from its members; or
• on the occasion/ event of the marriage of the individual; or
• under a will/ by way of inheritance; or
• in contemplation of death of the payer or donor (person) as the case may be; or
• from a local authority as defined under Explanation in clause 20 of section 10​ of the Income-tax Act,
• from any fund, foundation/Trust, university, other educational institution, hospital or other medical institution, any trust or institution referred to in section 10 or
• by any fund, trust/foundation institution, any university, other university other educational institution, any hospital, other medical institution referred to in sub-clause (iv) (v) (vi) (via) of clause 23C of section 10 of Income tax act 1961 ; or (applicable if the property is received on or after 01.04. 2017)
• from or by a trust or institution registered under section 12AA​​ of income tax act; or
• from or by a trust or institution registered under section 12A of income tax act; or (applicable if the property is received on or after 01.04.2017
• by way of transaction not regarded as transfer under section 47(i)/(iv)/(v)/(vi)/(via)/ (viaa)/(vib)/ (vic)/ (vica)/ (vicb)/ (vid)/ (vii) of this act
• from an Individual by a trust/foundation created or established solely for the benefit of relative of the Individual. (applicable if the property is received on or after 01.04.2017
• from such of person’s and subject to such conditions as may be prescribed.

Gift received from relatives are exempt from tax,  relative for the purpose of claiming such exemption

​​Gift received from relatives are exempt from tax.  by virtue of Section 56 of income tax act. ​Following persons would be considered as relative ​

(a) Spouse of the individual;

(b) Brother/sister of the individual;

(c) Brother/sister of the spouse of the individual;

(d) Brother/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 line number (b) to (f).​

Gifts of movable property received by an individual or Hindu Undivided Family (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​:

Prescribed movable property is received without consideration (Example- received as gift).

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

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

Prescribed movable property means:- (share, securities, jewellery(Gold, Silver etc), archaeological collections, drawings, paintings, sculptures or any work of art and bullion, being capital asset of the Income taxpayer.

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

In flowing case movable property received without consideration, i.e., received as gift by an individual or HUF is not charged to tax

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

• Property received from relatives.
• Property received by a HUF from its members.
• Property received on the occasion of marriage of the individual.
• Property received under will/ by way of inheritance.
• Property received in contemplation of death of the donor(person).
• Property received from a local authority as defined under section 10(20​) of the Income-tax Act 1961 ).
• Property received from any fund, foundation/trust, university, other university, other educational institution, hospital or other medical institution, any trust or institution referred to in section 10(23C) of income tax act 1961.
• Property received from or by a trust or institution registered under section 12AA​ or section 12A of income tax act​​.
• 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 of income tax act]
• From an individual by a trust/foundation created or established solely for the benefit of relative of individual.
• from such of person’s and subject to such conditions as may be prescribed.

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