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.
Hi,
I had brought a gemstone in Dubai which turned out to be an antique / collectors item. Now still I am abroad and here a person wants to buy it. Will the remittances of this sale to my account in India taxable? Your immediate response will be highly appreciated. THANKS
What documentation is required for IT authorities for gift from a relative? Is the fact that the amount comes from a relative sufficient.
If the amount is significant then better to draft a gift deed by mentioning the pan number of the giver and receiver and do mention that he’s giving gift due to natural love and affection.
Hi
My father in of Indian nationality, lives and has retired in India. I am a british citizen and have been in the UK for more than 10 year.s
He’s wishes to send me a million dollars, I understand that no tax is payable because he is my father. is there any issues on sending the money to UK?
Do you know efficient methods to send large amounts from india to the UK?
thanks
anil
Sorry I am not aware of a way to do this.
I received a gift from my parent company in the US 2 years back. Does the company I work for in India (wholly owned subsidiary of the parent company) have the right to collect Gift Tax now after my return to India?
Gift from your company. Great!! but pooja, your company doesn’t come in the definition of relative, so better talk to your company’s tax accountant. Depending on the type of gift if tax laws say so, then your tax calculation will automatically take into account that gift. As your employer will pay your tax and file your return as far as salary income is concerned, so don’t worry if that gift is taxable then your company will take care of it.
I like to gift my father a house , which I have in my name. can i gift him. What is the procedure.
You have to draft a gift deed on a stamp paper, get it witnessed by 2 witnesses and register it. Registering a gift deed especially in case of immovable property is mandatory,failing which the transfer would be invalid. Also pls note that this transfer would be irrevocable. Once the property is gifted you will not be able to reverse the transaction and not even ask for any compensation.
“irrevocable” means? again father can not gift (or sell) it back to son?
Dear Sir,
I have released a site of my father to my sister through a release deed registered with the local authorities. My sister inturn has given me a gift of Rs. 12 lacs. Is this taxable? Please let me also know what are the documentations required for this gift from my sister.
Regards,
S.Vaidyanathan
I am sorry, not familiar with rules on release deeds.
This is a inherited property from my late father, which is shared by all the sons and daughters of my father. All of us have given in writing to my elder sister that we will relinquish our rights on the property (which is in the form of release deed). The site has now been transferred from my father to my sister. Inturn, my sister has given us 12 lakhs. My question is whether we can consider this 12 lakhs as gift since it does not attract any gift tax.
I am Indian citizen and staying and working in India. I wish to gift to my younger married sister. I am of 58 yrs, single and have no liability. How much maximum amount I can gift to my sister and how can I claim rebate in my income tax return ?
Lata, you can gift any amount without any limit. There’s no rebate available on gifting. Its just that for your sister, the gift received will not be taxed.
Hi, I am an NRI but I regularly file Income Tax returns in India for my India Income. I want to gift INR25Lacs to my father who is a resident Indian and an income tax assessee. I had transferred the requisite amount to my NRE a/c in India. But somehow, I transferred INR10Lacs to my NRO account out of that remittance. Now, Can I gift INR15Lacs from NRE a/c and INR10Lacs from NRO a/c to my father so that it is tax free in his hands and in my hands also? What documents, if any, may be required by the income tax authorities in India for the assessment of my father’s or my own?
Gifts are tax free so you can give this to your father. I’m not sure about documentation, he may need to show it as a gift in his assessment and the bank statement may be enough but I don’t know this for sure.
Yes Gopal, you can do this. gifts from Son to father is totally tax free in father’s hand. It doesn’t matter from which account the amount is getting transferred. For you it is already out of tax paid income, so you don’t have to pay any extra tax. You don’t have to do any documentation for this. If at all you want to do the same, than you can write a simple Gift deed saying that you are gifting this much amount out of natural love and affection to your father on plain piece of paper quoting yours and your father’s PAN number.
had a few questions:
1. is there any tax associated with gifting a land from daughter(NRI) to dad(Indian Resident) on the Indian side?
2. On the US side, it looks like the person gifting the land has to pay taxes irrespective of daughter-father relation. Is that true, if so how does the calculation work?
1. No, there is no gift tax in this case.
2. Sorry, not aware of this answer.
Hi, I am an NRI but I regularly file Income Tax returns in India for my India Income. I want to gift INR25Lacs to my father who is a resident Indian and an income tax assessee. I had transferred the requisite amount to my NRE a/c in India. But somehow, I transferred INR10Lacs to my NRO account. Now, Can I gift INR15Lacs from NRE a/c and INR10Lacs from NRO a/c to my father so that it is tax free in his hands? What documents, if any, may be required by the income tax authorities in India?
Hi,
I have a query with regards to Transfer/Sale of property. The case being
Suppose i am buying a land from a non-relative. The FMV of the land is 50 lakhs. I am buying the same at 10 lakhs.
1-Will the balance amount of 40 lakhs (FMV-Consideration) be termed as gift received
2- if yes, then do i have to prepare a gift deed . and what will be the tax implication of the same(40 lakhs) in my hand
3- If no, what other things i would be required to take care while buying the property at a lower than FMV.
4- Any tax implication in the hands of the seller?
Thanks,
Please reply thru e mail
Kindly let me what tax liability my wife will have if she gets cash gift from our daughter. My wife is 76 yrs of age and is not an income tax payee now for all the services we had done for my daughter and son in law when.when they needed in early life my daughter feels she has to compensate us as they are well off now, I know that the interest from the gift if invested in bank will be added to her other income please clarify
Thanking you
Rs
The gift itself will not attract any tax and your wife won’t have to pay any tax on that but when she invests that anywhere and earns interest on it then she will be liable to pay tax on that.
There’s a property on my mother’s name and we need to sell it in few days. We plan to re-invest Capital gains in form of new property and tax saving bonds. I want to know if my mother could gift me a part of her capital gain as a gift immediately after sale of property( in the form of new property or tax saving bonds) with zero tax gain on these funds. Following are the two ways which I can think of : 1) She buys a new property in my name and could show that in her capital gain investment. 2) She buys a new property in her name only and then immediately transfers it to me without any tax gain. Please help me and suggest some possible way for this situation.
1) if she buys property in your name, then capital gain tax could not be saved. As for that the property has to be in her name as sold property was of hers only.
2) She can do that,but in this case the property transfer charges (stamp duty, registration fees etc.) has to be paid.
Thanks for your reply Mani ji. It is understood from your second point that there’s no 36 months restriction on gifting a newly bought property (no short term capital gain issues either).
My next query Sir.
Can she gift a part of original property to me and bring me co-ownership of property so that once property is sold, I can have my independent share of money .
Good Morning Sir,
1. I am Tax Consultant, I want to know that my client (Female) want to give gift of Rs. 2/- lacks to her Husband. So from the definition of Relative it is exempted from tax liability but how can I display this in IT return that she/he given or received gift in their IT return as per IT Act.
2. Whether the gift given or taken is necessary to take in written form? If yes, in which manner.
Hi,
I am a government employee and i wish to trade in stock futures through my mother’s(a house wife without any income) account.
1. If i gift her some amount and she invests it and makes profit would it be considered as my income or her income ?
2. If I give the amount as a loan will there be any advantage ? Or would it be better if my wife gives the money to my mother?
3. My wife is not working and is not having any income.
Thanks in advance
1.) her income
2.) Nope. as you are into service so you cannot show this as business expenses. So gift ot loan will hardly make any difference.
3.) If you gift your mother through your wife who herself is not working. This will make things bit complex. It may lead clubbing of income in your name.
CAN NRI SON IN LAW GIFT TO HIS FATHER IN LAW AND MOTHER IN LAW IF YES THAN WHAT IS UPPER LIMIT
Yes he can gift…and there is no upper limit.
I have booked / purchased a flat in my Name in Mar’13 in which my father has contributed a sum of Rs. 23.7 Lacs and further he plans to contribute a sum of Rs. 5 Lacs at the time of registration & possession of the property. The amount of Rs. 23.7 lacs. was directly paid to the builder from his account through cheque.
What steps should he take to regularize this transation so that there are no tax / legal implication?
Further If Gift Deed is the way then what are the ways to make a Gift Deed?
Dear Sirs,
I’ve read with great interest the advise provided to the many people with concerns regarding tax and property.
I’m a UK resident born and raised in UK and my parents both born and raised in India however married in the UK 42 years ago.
My grandfather purchased land 20 years ago which my father inherited following my grandfather’s death. My father died 2 years ago without leaving a will and my investigations revealed that ownership & title will automatically fall to the legal heirs.
My questions is if I sell the property/estate with a current market value 7crore what % tax are we required to pay? And the best way to move the cash back to the UK.?
Many Thanks for your kind support.!
Hi Sir.. I want to invest in a commercial property in the name of my house wife, further as I was away from India for the past 11 Months continously I stand to be a NRI. In that case will there by any tax implications on me or my spouse if I transfer the money to invest in this property from my NRE account to my wife’s normal savings account and she makes the payment and get the property purchased in her name ?? Please advise !
Hi..Can Manshu or Manikaran Singal or anyone else reply to my query please ? Thanks !
Manikandan, Whatever investment you want to make in the name of your spouse (who’s a housewife) , the income generated from that investment will be clubbed in your income and taxed accordingly. It doesn’t matter if you are NRI or not. Rules of clubbing are same for everyone.