Under the provisions of Section 56(2) gifts are taxed in the hands of the receiver (donee) if the aggregate value of the gifts during an year exceeds Rs 50,000. Once the amount exceeds Rs 50,000 whole of the amounts will be added to income and they would get taxed at the rate applicable to the total income of the assessee.
For example if Mr A receives gifts of Rs 60,000 during an year the whole of the amount would be added to his income and taxed as per slab rate applicable to him. However following gifts are fully exempt.
- From Relatives.
- On the marriage of individual
- By will or inheritance
- In contemplation of Death of payer
It is very important to know who is a relative for this purpose. Relative means :
– Spouse of Individual
– Brother & Sister of Individual
– Brother & Sister of Spouse of Individual
– Brother & Sister of either of the parents of Individual
– Any Lineal ascendants or descendants of the individual
– Any Lineal ascendants or descendants of the spouse of the individual.
Many people tend to ask this question – Are gifts at the time of marriage exempt without any limit. Though there is no limit set by the Income Tax Act, if names and addresses of the donees are not proved these amounts will not be exempted.
One should remember that it is not just gifts in the form of money but all kinds of gifts are taxable in the hands of the receiver if the total amount exceeds Rs 50,000. This can be money, any kind of movable property like jewellery, shares etc or immovable property. It is also pertinent to note that if anything is received for inadequate consideration, difference amount would be treated as gift. For instance if a property whose market value is Rs 30 Lakhs is bought at Rs 20 Lakhs, difference amount of Rs 10 lakhs would get taxed.