Tax Treatment of Gifts: Gifting is a great way to show love and affection to your friends, relatives and well-wishers. But the recipient of such a gift should keep in mind how such a gift is taxable in his hands. Although gifts received from relatives are not taxable, any gift received from non-relatives worth more than ₹50,000 is added to your income and taxed as per your existing IT (income tax) slab.
By the way, gifts received during marriage are completely exempted from tax, no matter from whom you receive them. Here’s a guide to how gifts are taxed.
There is no tax on gifts received from relatives
Gift of money to an individual or HUF (Hindu Undivided Family) will not be taxable in the following cases.
received money from relatives
For this purpose, relative means: in the case of an ‘individual’
-that person’s spouse
-that person’s brother or sister
-Brother or sister of that person’s spouse
-A brother or sister of either of that person’s parents
-Any earlier ancestor or descendant of that person
-Any earlier ancestor or descendant of that person’s spouse
– Spouses of people mentioned in (b) to (f)
wedding gifts
According to CBDT (Central Board of Direct Taxes), “Gifts received on the occasion of marriage of a person are not taxable. Apart from marriage, there is no other occasion when gift of money received by a person is not taxable. Therefore, gifts of money received on occasions like birthday, anniversary etc. will be taxable”.
tax treatment of real estate
If any immovable property is gifted from relatives then there will be no tax on it. The term ‘relatives’ includes those people whose names are given above. A friend is not a relative as listed above, and hence, gifts received from friends will be taxable (if the other criteria for gift taxation are met). Gift of any immovable property given by a non-relative is taxable whether the property is located in India or abroad.
Immovable property received by an individual or HUF without any consideration will be taxable only if the following conditions are fulfilled.
-Immovable property, whether land or building or both, received by an individual/HUF.
-For such an individual or HUF, immovable property is a capital asset under section 2(14).
-The stamp duty value of such immovable property acquired without any consideration is more than ₹50000.
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Tax treatment of movable property
There will be no tax on movable property received from relatives. But if movable property has been gifted by a person who is not a relative and if the total fair market value of such property received by the taxpayer during the year is more than ₹ 50,000, then it will be taxable.
“In this case, the fair market value of the fixed movable property will be considered as the income of the receiver. Fixed movable property means shares/securities, jewellery, archaeological collections, drawings, paintings, sculptures or any other work of art and bullion, which is a capital asset of the taxpayer and also includes Virtual Digital Asset (VDA),” the CBDT said.
Keeping this definition in mind, anything gifted as movable property other than anything included in the definition above will not be taxable, for example, a television set received as a gift will not be taxable as a television set is not included in the definition of movable property.”
Tax treatment for HUFs
Tax treatment for gifts received by HUFs has also been clarified. In case of HUF or any of its members, the following items will not be taxable:
Money received on the occasion of marriage of a person (associated with HUF).
Money received under will/inheritance.
Money received after the death of the giver or donor.
Money received from any local authority (as explained in the Explanation to section 10(20) of the IT Act).
Money received from any fund, foundation, university, other educational institution, hospital or other medical institution, or any trust or institution referred to in section 10(23C). (From FY 2023-24, this exemption will not be available if any amount is received by a specified person specified in section 13(3).) For AY 2023-24, this exemption will not be available if any amount is received by any specified person specified in section 13(3).
Money received as a result of demerger or amalgamation of a company or business reorganization of a co-operative bank under section 47.
Money received from any fund/trust/university/other educational institution/hospital/other medical institution specified in section 10(23C)(iv)/(v)/(vi)/(via) (applicable if property is purchased on or after April 1, 2017).
Money received by a person through a trust created or maintained for the benefit of a relative.
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