Gift Tax Law
- ByAdmin --
- 21 Sep 2024 --
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Gift tax law in India
A person who transfers something to another without receiving anything in exchange for only a portion of its full value is subject to the gift tax. Whether or not the donor intended for the transfer to be a gift, the tax is still due. In essence, gift tax is the tax imposed on receiving presents. These presents might be anything from low-value items to expensive gifts like securities, jewels, real estate, etc.
Indian laws pertaining to gift taxes:
- The Indian Parliament adopted the Gift Tax Act in 1958. The act was introduced with the intention of taxing both giving and receiving presents under specific conditions.
- In India, gift tax was eliminated in 1998 in accordance with clause (3) of the Gift Tax Act, 1958.
- Under the heading "Income from other sources," the government revived it in 2004. It was then subject to the Income Tax Act of 1961.
- Any asset or money that you acquire from someone else without any sort of consideration is considered a "gift" under the IT Act.
- According to the Income Tax Act's section 56 (2)(vi), any gift that you get in a financial year that exceeds Rs 50,000, whether or not you receive consideration, will be included to your other income and taxed based on your tax slab.
- In India, gifts up to Rs. 50,000 annually are tax-free.
The Income Tax Act includes gift tax as a direct tax.
The Gift Tax Act of 1958 states that previously, it was the gift giver's responsibility to pay gift tax. This is a direct tax under the existing income tax regulations. This rule states that the tax payment will be the gift recipient's responsibility. The recipient must disclose the gift's value when filing their income tax return under the heading "income from other sources." As a result, the gift recipient's income for that fiscal year includes the taxable amount of the gift.
Gifts that fall under the Income Tax Act's purview include:
1. Any amount of money given without any expectation of return
2. Real estate that can be moved, such buildings and land, without taking into account
3. Immovable property for insufficient payment
4. Any item (jewellery, shares, artwork, etc.) that is not real estate that is given away without payment
5. All property, excluding real estate, should be taken into account.
In India, the annual exemption from gift tax for individuals is limited to INR 50,000 per donor.
Excessive gifts from non-family members are subject to standard income tax rates for the receiver, which are determined by their tax slab.
The Income Tax Act states that presents from family members are not taxable. The Income Tax Act provides a list of individuals who are considered family.
Union of India v. M/s. Jai Trust, Writ Petition No. 71 of 2016, According to the ruling of the Bombay High Court, capital gain tax is not due when shares are gifted. The bench noted that Section 45 of the Income Tax Act mandates that the assessee take into account any earnings or gains from the transfer of a capital asset. The profit or gain can only be quantified once consideration has been received. A gift is generally understood to be an intentional, voluntary transfer of property from one individual to another. A gift is given without expecting anything in return, and a transaction that involves payment is not considered a gift.
Conclusion:
The "donor-based" method of taxation was implemented by the Gift Tax Act. But in October 1998, this Act was repealed, making all gifts tax-free. The Finance Act of 2004 brought back the provisions of the gift tax and placed them under Section 56 of the Income Tax Act, 1961, which went into force on April 1, 2005. This time, there was a significant change: the gift tax became a "donee-based" tax structure. The new regulations state that gifts above ₹50,000 are subject to recipient taxation rather than donor taxation.
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