Gift Tax in India

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Gift tax in India is regulated by the Gift Tax Act which was constituted on April 1, 1958. It came into effect in all parts of the country except Jammu and Kashmir. As per the Gift Act 1958, all gifts in excess of Rs. 25,000, in the form of cash, draft, check or others, received from one who doesn't have blood relations with the recipient, were taxable.

However, with effect from October 1, 1998, gift tax got demolished and all the gifts made on or after the date were free from tax. But in 2004, the act was again revived partially. A new provision was introduced in the Income Tax Act 1961 under section 56 (2). According to it, the gifts received by any individual or Hindu Undivided Family (HUF) in excess of Rs.50,000 in a year would be taxable.

Important Definitions for Gift Tax

"Gift" means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money's worth, and 14 [includes the transfer or conversion of any property referred to in section 4, deemed to be a gift under that section].

"Donee" means any person who acquires any property under a gift, and, where a gift is made to a trustee for the benefit of another person, includes both the trustee and the beneficiary;

"Donor" means any person who makes a gift.

According to the law, individuals can receive gifts from the following sources:
  • Relatives or Blood Relatives
  • At the time of Marriage
  • As inheritance
  • In contemplation of death
Though Gift Act 1958 was not initially applicable to Jammu & Kashmir, however the current clubbing provisions in the Income Tax Act 1961 would be applicable to gifts of movable properties in the said state as well.

Gifts Exempted from Tax

Gifts are exempted from gift tax in the following cases:
  • The gift was given by a blood relative, irrespective of the gift value.
  • Immovable properties located outside the country.

An Individual cannot take his/her movable properties outside the country, unless the donor-

  • is an Indian citizen, who is originally a resident of India, or the individual is not a resident of India during the year of gift
  • Out of balance gift by NRI (Non-Resident Indian) in his Non-resident account.
  • Foreign currency gift of convertible foreign exchange, remitted from overseas by an NRI to a resident relative.
  • Foreign exchange asset gifted by NRI to his/her relatives.
  • Special Bearer Bonds, 1991.
  • Saving certificates issued by the Central Government (notified as exempted).
  • Capital Investment Bonds up to Rs.10,00,000 per year.
  • Relief Bonds gifts by an original subscriber.
  • Gifts of Certain bonds from the NRI to his/her relatives, which are subscribed in foreign currency (specified by the Central Government).
  • Gift to government or any local authority.
  • Gifts to any charitable institutions.
  • Gifts to notified temples, churches, mosques, gurudwaras and other places of worship.
  • Gift to children for educational purpose (Reasonable amount).
  • Gifts by an employer to its employees in the form of bonus, gratuity or pension.
  • Gifts under will.
  • Gifts in contemplation of death.

Last Updated on June 20, 2015

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