Gift Tax

What is Gift Tax?

Gift tax basically means the tax on gifts. The taxation rules applied to the gift exchange have been made under section 56(2)(vi) of the Income Tax Act. There is a certain threshold of the tax applied on the gifts, which is discussed further. The gifts of value less than Rs 50,000 are not taxable in a financial year.

Gift Tax Exemptions In India

If the value of the gifts received in a financial year exceeds Rs 50,000, then it would be taxable in India. But there are some conditions under which the tax can be exempted, especially on the gifts that are received from close relatives and friends. Thi sis only under some special circumstances, such as weddings or inheritances.

The gift tax exemption relatives list includes gifts from the spouse, brother, sister, spouse of brother or sister, parents, etc.

Types of Gifts

The income tax gifts are divided into three categories from the perspective of taxation:

1. Monetary Gifts: These include gifts that include any type of money received in the form of cash, drafts, checks, and bank transfers. So, if you receive money in the form of any of these, then it would be considered a gift for tax purposes.
2. Movable Property Gifts: This category includes items that can be moved, such as bonds, shares, jewellery, sculptures, paintings, and other possessions of value. If a movable property is received at a lower price than its market fair value, then the difference is also considered a gift.
3. Immovable Property Gifts: The immovable properties are also considered a gift if it is received at a price lower than their stamped duty value. These include buildings, lands, residential or commercial properties. It also means that the difference between the price of market value and the price originally paid will also be considered as a gift.