Accept Gift and Pay Tax
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Transcript of Accept Gift and Pay Tax
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7/30/2019 Accept Gift and Pay Tax
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Gift Tax in India Rules and exemptionsThe sample examples I have provided below have become common in our regular life. Hence we
need to be little careful in knowing what are the rules and regulations of Gift tax in India. Have you asked your friend to transfer Rs 60,000 to your bank account and have you settled offline
through cash? Be careful, as income tax department may scrutinize and ask to pay income tax on
the amounts received from your friend in your bank account. You should know the ground rules of
Gift tax in India on how to deal them to prove that such transaction is already settled. Hence it is
important to know about gift tax in India and its rules and exemptions.What is Gift Tax in India?As per section 56(2) indicates any sum of money received exceeding Rs 50,000 without
consideration (cash or kind) by individual or HUF is chargeable to tax as income from other sources
subject to certain exclusions or exemptions. Such gift tax needs to be paid as per income tax slab
applicable to individual.Various gifts which fall under Gift tax in India1) Cash Gift exceeding Rs 50,000:Any amounts exceeding Rs 50,000 in a financial year without consideration is liable for gift tax in
India. Please note that the amount indicated need not be single transaction. All multiple
transactions from multiple people would be clubbed to get this amount in a financial year.2) Gift in the form of Movable propertyAny items like jewellery, drawings, and paintings, transfer of share or securities would fall under
movable property. Any gift given in the form of movable property falls under gift tax. Market
value would be considered as gift value and necessary tax is applicable if it crosses Rs 50,000 in a
financial year.3) Immovable property giftIf you have received land or property exceeding Rs 50,000, it would fall under gift tax.- Without consideration Full value of the property would be considered as gift.- Part consideration Full value of property minus the amounts paid by you to acquire such
immovable property would become the gift value.- Stamp duty value of the property would be considered to assess the value of the gift amount.Exemptions / Exclusions for gift tax in India1) Gifts to relatives are exemptedGifts given to relatives are exempted from gift tax in India. The relative definition as per
Income tax act includes Parents, Brothers, Sister, Spouse, Children, brother/sister of your spouse,
brother/sister of your parents, lineal ascendant or descendant of your spouse and spouse of
people referred above.Any gift received from above people defined as relative is exempted from gift tax.2) Gift up to Rs 50,000 is exempted in a financial yearAny amount paid to any one up to Rs 50,000 is exempted from gift tax in a financial year. If the
gift amount exceeding Rs 50,000, entire amount is taxable and not additional/incremental
amount.
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3) Gift given on wedding is not taxableGift received during wedding from anyone is not taxable.4) No tax on gift received either through WILL or inheritanceIf you have received any amount by way of gift through WILL or inheritance, it would not be
taxable under gift tax.Frequently asked questions on Gift tax in India1) Gift received by minor children or spouse is taxable?Any gift received by minor child or gift received by spouse, the same IT rules would apply. If they
are exempted with any of the points indicated above, it would be treated as exemption from gift
tax, else the amount would be clubbed with your income and necessary income tax as per your
income tax slab needs to be paid. This is as per clubbing rules of income tax.2) During emergency I requested my friend to transfer Rs 60,000 to my bank account, will it
attract gift tax?If you have taken loan from your friend and you have a proof that you have returned that money
through your bank account, you need not worry. But if you have paid offline through cash, it isbetter to document and take necessary signatures from your friend so that in case of any IT
scrutiny, these documents would be handful. If you cannot prove, IT dept has every right to
include this as taxable income and you need to pay tax. Also if you have taken the amount as loan
and not repaid within same financial year through your bank account, it is better to have a
document that you have taken loan so that you can prove this to IT dept.3) I have made a FD in my spouse or child name, will it attract gift tax?Since this falls under Relative category, no gift tax is payable. However, since your spouse or
child do not have income, the interest on such bank FD needs to be added to your income and
necessary tax needs to be paid. This is as per clubbing provisions.4) I have received gift from non relatives for Rs 51,000, do I need to pay tax on Rs 1,000 (Rs51,000 minus Rs 50,000 exemption)?No. Once the amount crosses Rs 50,000, you need pay tax on total amount of Rs 51,000 and not
incremental amount.
5) I have gifted the property to my wife and she sold after few years. Since she falls under
Relative, she is not supposed to pay gift tax and even exempted from long term capital
gain. Am I right?From gift tax point of view, yes, she is falling under relative category, no gift tax is applicable.
However, when she sold the property, any profits made would be clubbed with your income and
necessary long term capital gain tax needs to be paid.
*Contributed by S. Parashar