This article is written by Aashish Ramchand, a Chartered Accountant by profession. Aashish is the co-founder of makemyreturns.com. He also has completed his CFA Level I (American) and is very passionate about writing articles on taxes and tax advisory. He can be reached at connect@makemyreturns.com
Generally, gifts are not regarded as Income chargeable to tax. However by virtue of Section 56(2) any sum of money exceeding Rs. 50000 received without consideration by an individual or an HUF from any person is chargeable to tax as income under other sources subject to exclusions as below:
- Receipts on occasion of marriage of the individual
- Receipts under a will or inheritance
- Receipts received from a relative.
Since 1/10/2009, Section 56(2) has been amended and the scope of gifts and will include even immovable properties or any other property besides sums of money under its ambit.
Gifts that are not taxable at all are those that are received from relatives. Relatives are defined by the following relationships of the individual:
- Parents
- Parents siblings and their spouse
- Siblings
- Spouse of siblings
- Daughter and son
- Spouse of daughter and son
- Spouse
- Spouse’s parents
- Spouse’s siblings and their respective spouse.
Even NRIs are covered as long as they fall in the category of relatives. Therefore an individual Indian resident can receive a tax free gift from an NRI as long as he/she is that individuals relative. Any amount can be received as a gift from a relative. Also the purpose for which the gift is received from a relative is inconsequential as it is completely tax free. Thus a gift received can be used for any purpose ranging from purchasing shares to buying property to even simply keeping it with the bank.
Note on gifting on immovable properties
There is a valuation aspect involved in gifting of immovable properties:-
- If the property is gifted without any consideration then if the stamp duty value exceeds Rs. 50000/-, stamp duty value will be taken
- If the property is gifted for a consideration, then the actual value of the property will be taken
In case of other properties:
- If gifted without consideration and fair market value exceeds 50000, then the fair market value will be taken as the final value
- If gifted for a consideration and the FMV less consideration is greater than 50000, then the FMV less consideration amount will be taken as the value of the gift.
As mentioned earlier NRIs can also give gifts to resident Indians. Therefore, It is important to understand the meaning of an NRI as per the IT act.
An individual will be treated as a non resident in India in any previous year if he fulfils any of the following two conditions:
- he/she is NOT in India in that year for period or periods amounting in all to 182 days or more, or
- Having within the four years preceding that year NOT been in India for a period or periods amounting in all to 365 days or more, and has NOT been in India for 60 days or more in that year.
Dear Sir,
Can my first cousin (my father’s real elder brother’s son) who is an NRI staying in Kuwait send Rs. 10 Lakhs as a gift in my father’s or mother’s name?
I actually wanted the gift in my name, but having read this article I realise that if I get a gift from my first cousin, then it would be taxable for me. Please correct me if I am wrong?
Thanks in advance!
Regards,
Nihaal
Please consider updating your original article to include the FCRA reporting requirement by receiving individual for Rs. 1 Lakh or more.
See below from Home Ministry Website.
Q.10 Whether foreign remittances received from a relative are to be
treated as foreign contribution as per FCRA, 2010?
Ans. The position in this regard as given in Section 4(e) of FCRA,
2010 and Rule 6 of FCRR, 2011 are as under:
Subject to the provisions of section 10 of the FCRA, 2010, nothing
contained in section 3 of the Act shall apply to the acceptance, by
any person specified in that section, of any foreign contribution
where such contribution is accepted by him from his relative.
However, in terms of Rule 6 of FCRR, 2011, any person receiving
foreign contribution in excess of one lakh rupees or equivalent
thereto in a financial year from any of his relatives shall inform the
Central Government in Form FC-1 within thirty days from the date of
receipt of such contribution. This form is available on the website
http://mha.nic.in/fcra/forms/fc-1.pdf
Thanks for sharing this info Kamal – I’m going to read little more on this topic and then update the post.
Hi,
I am going to be marry next month and have few questions:
1. how much amount can my parents in law gift to me tax free.
2. How much they can gift to their daughter tax free.
3. Can they gift anything like cash,gold, car, equity etc? are all of them would be tax free.
4. Suggest me the best way so that no gift tax arise in marriage.
5. Agter marriage suppose 6 months or so can they gift anything will it be considered tax free.
1. before marriage they are not your parents in law and thus limit of non relatives will apply.
2. Any amount.
3. To daughter …yes.
4. Gifts recieved on the marriage are totally tax free. Just from income tax perspective you have to keep record of each and every gifts and the person from whom you are recieving it. in case it is asked by authorities and to prove that these are marriage gifts.
5. yes.
Just a tax planning advise…if your would be spouse is a non working girl and thus has no tax file, then better to recieve all gifts in her name, so you can build up a good tax file for her. This will considerably reduce your tax liability.which may arise out of interest or any other income after investing these marriage gifts. Also this tax file will help you in long term.
how much gift from friends are not taxable
Less than Rs. 50,000.
Bipin, gifts from non relatives (including friends) are non taxable if recieved upto Rs 50k in total. If the total gifts in a year from non relatives exceeds Rs 50k than total amount with no exemption of Rs 50k will be added in your income and taxed as per slabs.
Have two queries
1. if my father give Rs 200000 to my son , who is 14 years old , will it be added in my income and will be taxable. my son is not having any PAN
2. Same amount if he gives to my wife, who has her PAN no, will it be clubbed with my income ?
in both the cases, how the interest (if the amount is deposited in bank) will be taxed.
1. Gift from grandpa to grandson is tax free, but the income generated out of that gift will be added in parents income.
2. gifts from father in law to daughter in law is tax free but the income genererate of that gift will be added to father in law’s income.
i want to know that monetary gifts of Rs 50000 or more received from friends is taxable or not
Yes, from friends they are taxable.
My father’s brother’s wife and daughter wish to gift me a land with building property valued at Rs 2.oo crores (current valuation of property for stamp duty purpose). State Stamp Duty rules do not recognise this as a Gift from a relative. and as such, stamp duty has to be paid accordingly. However, I wish to know the status of this Gift as per the Income Tax rules ie whether I have to pay Gift tax on the value of this property?
Father’s brother’s wife is covered so gift from her will be tax free.
Thanks for the response. Here the Gift is from both the father’s brother’s wife and daughter (wide and daughter jointly own the property). I understand that gift from the father’s brother’s wife is tax-free, but does that extend to a gift from the father’s brother’s daughter also.
Thanks for the response. I understand that gift from the father’s brother’s wife is tax-free, but does that extend to a gift from the father’s brother’s daughter also.
Is a Gift of a property from father’s brother’s daughter tax-free?
It is not tax free, and in the case of joint ownership, I really don’t know what would happen, better consult a CA.
can i receive a taxfree gift from my mother’s sister and viceversa
Mani has shared an excellent link that shows gifts from which relatives are tax free. Mother’s sister is one of them.
You can see the whole list here Charu: http://taxworry.com/gift-meaning-relative-huf-exempt/
thanks Manshu ,I think the income from gifts should come under income from other categories and will be exempt from tax.please clarify..
Yes, you are right, it will be exempt from tax.
hi,
how is the gift tax calculated. is the gift amount taken as a part of your total income or is it taxed under a seperate category.
for example, if i have an income which falls into 10% slab , but i receive a gift of say 5 lacs from my mother,
a) will it raise my tax slab to 30% ( income more than 8 l)
b) how much tax exactly will my mother will have to pay on an amount of 5 lac
Yes, when you include the value of gift in your income, you will get an increased tax slab, and will have to pay tax according to that.
Your mother won’t have to pay any tax on the amount she gifts.
thanks manshu,
but this is quite confusing…i was under the impression, that the person who receives gift , doesn’t have to pay tax, but the one who is gifting has to ..
please clarify..
also how much tax ( please tell me the figure) one has to pay on an amount of 5 lac…is it of the order of 25%..
No Charu, the person giving the gift doesn’t have to pay tax since it is assumed that they have already paid tax on the income they generated which is the source of this gift.
The person receiving the gift has to pay tax as this is like an income source for them. So in your case, when you get the gift from someone who is not a relative as defined by the IT Act, that will be added to your income, and as a result you will have to pay tax. Over 5 lakhs is 20% plus surcharge, so it will be something like that. Though it really depends on what other deductions you get based on your expenses, savings etc. so I can’t tell you an accurate figure, but over 5 lakhs is 20% and less than that is 10% approximately.
please note that the person giving me the gift is my mother as i told in my first statement and kindly reread the query and clarify.
also can we make a gift deed retrospectively if the money involved was transferred through RTGS..
Even after reading your questions again, I think I have already answered them. You should probably post them in another forum where someone can do a better job of understanding what you are saying and answering it.
Hi
Both me and my wife are working and both have taxable income from salary. If I gift her some money will it be taxable to me or her? If not what is the maximum that I can gift to her?
If the money that I gift her has to be clubbed with her taxable income then can I gift that amount to my daughet who is 2.5 years old?
Thanks
Vivek
Whatever monetary gifts you exchange between each other will not be taxable in anyone’s hands.BUt if you or she invest that amount somewhere than the gain will be added in the income of one whose income is on higher side.
You can gift any amount to your daughter, but the income generated out of that will be clubbed in your income (over and above Rs 1500/- p.a)
Dear Mani
Thanks for your reply. Will I get any tax exemption if I gift cash to my wife or vice-versa?
Thanks
Vivek
If a Gift Received in an NRE account above Rs. 50000 from a non-relative living in Abroad be Taxable u/s 56 or any other provisions of the Income TAx Act?
I am sorry I don’t know about this.
Bharat, you mean gift recieved from NRE account or in NRE account? I guess you meant the former. If the gift above Rs 50k is recieved from a non relative living abroad than also the complete amount recieved will be taxable in your hands.
My brother is an NRI and wishing to gift me an amount of Rs.30 lacs.
Will there be any tax implications on both of us?
Can I invest the entire amount in shares?
It won’t fall under gift tax, and you are free to invest the money in shares.
Hi an NRI friend of mine wishes to transfer the property he had bought prior to settling overseas to his mother who is a senior citizen so that she stays comfortably. He is not likely to return to India and has taken UK citizenship. In this case my understanding is as follows :
1 – He has to execute a gift deed transferring this asset to his mother
2 – The mother has to pay stamp duty as per market value
3 – I also understand there will not be any tax implication either to him or his mother
Please correct if wrong
Kindly enlighten me as to what happens in case the mother decides she does not want the responsibility of maintaining another asset and decides to sell the property. What will be the tax implications in this regard?
Vinod, you have understood in the right way.
Regarding your second point of mother selling the property…she will have to pay the capital gain tax on the gains made.
Thank you for answering that Mani!
I want to know about gift tax ? Gifts that are not taxable at all are those that are received from relatives. Relatives are defined by the following relationships of the individual:
1. Parents
2. Parents siblings and their spouse
3. Siblings
4. Spouse of siblings
5. Daughter and son
6. Spouse of daughter and son
7. Spouse
8. Spouse’s parents
9. Spouse‘s siblings and their respective spouse.
from Each person Can taken gift exeeding Rs.50000/-from relatives.[ 1 financial Year ] ?
Yes, as mentioned in the article you can get gifts from relative without an upper limit, and not have to pay any tax on it.
can i gift 10,00,000=00 to my nephew
what is my tax libility and what is my nephew libility ?
You can give a gift to him but it won’t be tax free. It will be added to his income and then will be taxed accordingly. You will not have to pay additional tax for gift but you will have to pay whatever tax is applicable on how you earned this income.
Babulal…whatever your nephew (Major) recieves from you as a gift will be tax free in his hand as you come under the definition of relative (siblings of either of parent) for your nephew.
@manshu…had this been other way round..i.e where uncle recieve gift from nephew than uncle will have to pay gift tax.
Let me share one link from tax worry, where the author has described the relations in detail
http://taxworry.com/gift-meaning-relative-huf-exempt/
I am sorry for my error and thank you for correcting me Mani.
Dear Sir,
My Fisrt Cousin is an NRI.
He gifts a sum of 30Lacs to his Father Say Mr. “A” (My Fathers Sibling): Tax FREE?
Now Mr. “A” gifts me 25Lacs (He is my direct relative i.e. my Fathers Sibling) will this transaction be also TAX FREE?
Need Clarity over this.
Will we both be exempted under Tax (Myself & Mr. “A”).
If yes, then this is a big gap in the tax laws 🙂
Awaiting expert comments please.
sir can u suggest a gift format for gifting a shares from father to son which can be used in case required to produce before govt authority? Further whether is there any stamp duty payable on such gift? whether clubbing provision would attract in case of short term cap gain?
I found this format for a gift deed. This may be useful for you. http://www.caclubindia.com/share_files/format-of-gift-deed-1776.asp#.UVDwSBdQG8A
Hi there,
I have a question about a property that my mother wants to gift me. It’s my parents current residence in Vijayawada, Andhra Pradesh. It needs to be reconstructed and its my my duty to put money towards construction cost. I am planning to take bank loan but I can not get it directly as its not on my name. So my mother planned to gift me this property. This property is worth about Rs. 40lakhs.
My question is:
How much percent if tax I have to pay?
I am an NRI yet Indian citizen. How does my status effect my current situation?
Please help me.
Currently I am in India so I would like to complete all the formalities (transferring, taking bank loan, planning and start work) before I leave in April.
Thank you for your time and suggestions in advance.
Kind regards
Choudary
Chaudhary, you don’t need to pay any tax on the gift recieved from your mother and neither your tax status (NRI or resident individual) has anything to do with it.
But yes, you may have to bear expenses like some stamp duty or registration/transfer charges on transferring the ownership of the asset in your name.
my mother thru her savings in household expense money given by my father since their marriage in 1942 had a habit of converting it into gold and called it `Stree Dhan’.though a wealth tax assessee somehow this stree dhan never got into WT returns.6months prior to her death she made a gifdeed of that gold in my childs name for his wife etc.Is it legal ?If not what do we do?We do not have access to any records
First of all thanks for this useful article. My father in law wants to gift two properties to my self and my wife. Will I have to pay anytax? The total value of both the properties is around 55-60 lakhs (going by market rates). The properties were acquired by my father in law only 2 years ago. My wife and I am are NRIs and my father in law is a farmer so he doesn’t pay any income tax.
There would not be any tax on the gift from father in law to son in law.and father to daughter.
Hi – My building is being re-developed and our current apartment is in the name of my mother. I’d like to buy a bigger apartment in the new building for which I plan to take a loan. However, as the flat is in my mothers name – I won’t be able to take a loan directly. The general opinion is that she gifts me a part of the house (say 50%) and then I can apply for a loan on that 50% which can be used to buy a larger accommodation. My questions are: 1) Would I have to pay any tax on this gift as the estimated value will be around 70lacs. If yes, how much? 2) I just got married 2 months back – if she gifts this to me as a part of the marriage – would that still be taxable or is that exempt? Any other tips/suggestions would be very helpful. Thanks!
The answers are hereunder:
1. You don’t have to pay tax on the gift. But yes, you may have to bear some cost in transferring the partial ownership in your name.
2. Mother can gift any amount , in any shape to her son anytime with no tax liability on either part.