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