Tax on Gift in India

In India giving Gifts on special occasions like birthdays, anniversaries, festivals and especially on marriages, etc is very popular. Gifting is an integral part of Indian culture. People love receiving gifts but sometimes what they’re not aware of is the tax liability on the gifts that they received.

What does Gift mean?

A gift means any amount of money received or any property or articles like jewelry, pieces of art, etc received from friends, family, or any person as a token of love and affection.

When is the Gift received taxable?

Let’s say you receive a gift of ₹25,000 from a friend on your birthday. This gift will not be taxable. But your friend is more generous and gifts you a luxury watch worth ₹75,000. In this case, the value of the gift is more than ₹50,000 so it will be taxable.

As seen from the above instances, any gifts received individually or in total for a value exceeding ₹50,000 in a financial year will be taxable.

But what if gifts are received from relatives? Are they taxable?

We keep receiving gifts from relatives all around the year on various occasions. Imagine it’s your birthday and your father gifts you, your favorite car. Will it be taxable? The answer is no.

When you receive gifts from relatives like parents, brother, sister, spouse, or close relatives like maternal uncle/aunt, paternal uncle/aunt, their spouse, etc. it will not be taxed irrespective of the amount of gift received. A friend is not included in the definition of a relative.

A gift in case of Immovable Property

We people never pay the price asked by the seller at once, we always try bargaining and reducing the price. Some people like you and me are good at bargaining and we end up purchasing property at a discounted price, which may be less than the Stamp Duty Value of the property. Then, in this case, you might not be aware of the tax on the discount price that you received!

Here, the amount of discount will be taxed as a gift if the purchase value and Stamp duty value have a difference of more than ₹50,000 or 10% of the Stamp Duty Value.

For example, you purchased a flat for ₹30,00,000. The stamp duty value of the flat is ₹35,00,000. What will be the tax treatment?

Here the difference between the stamp duty value and the purchase price is ₹5,00,000 which is more than ₹50,000 as well as 10% of the Stamp Duty Value (i.e. ₹3,50,000). Therefore, the difference amount of ₹5,00,000 will be taxable as a gift in your hands.

When is the Gift received not taxable?

Under the following circumstances, the gift received will not be taxed:

  • Marriage: At the time of marriage a person receives a lot of gifts which definitely exceed the limit of ₹50,000. Also, not all of them are from relatives, many are from friends too. Imagine the hardship one has to go through paying taxes on the valuable gifts. To provide relief, no tax is levied on any gift received on the occasion of the marriage of a person.
  • Under will or by Inheritance: It is very common in India that the properties of fathers and grandfathers are inherited by the son and their children in the event of death. Any such property or article received as a gift under a will or by way of inheritance will not be taxable.
  • Received from Local Authority or Trust: You might receive some gift from Local Authority or Trust, university, or medical institution as a token of appreciation for services you have done towards the welfare of society. In this case, the tax will not be levied on any such gift received.

Reporting Gift in ITR

The gift received is reported under the head Income From Other Sources in Income Tax Return. If the gift received is not taxable, it will be reported under exempt income head.

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