Don't look a Gift Horse in mouth - Generosity to be taxed from today

By Vijay Kumar

IF you get a gift in kind (movable or immovable property) worth more than Rs. 50,000, from today, it is taxable as income from other sources under clause (vii) of sub-section 2 of section 56 of the Income Tax Act.

To remind the prospective gift takers about their liability, the CBDT has issued a Press Release highlighting the provisions of law effective from today. Any such person who receives a gift of any such property on or after 1st October 2009 must pay the income tax due on the value of the gift and disclose the taxable value of such property in the return of income for assessment year 2010-11 and subsequent years.

“property” means—

(i) immovable property being land or building or both;

(ii) shares and securities;

(iii) jewellery ;

(iv) archaeological collections;

(v) drawings;

(vi) paintings;

(vii) sculptures; or

(viii) any work of art;

So maybe that gift horse is not property after all.

There will be no tax on the following gifts

a. from any relative; or

b. on the occasion of the marriage of the individual; or

c. under a will or by way of inheritance; or

d. in contemplation of death of the payer or donor, as the case may be; or

e. from any local authority as defined in the Explanation to clause (20) of section 10; or

f. from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or

g. from any trust or institution registered under section 12AA .

Earlier cash gifts exceeding Rs. 25,000 were subject to tax with effect from 1st April 2004. Later the Act was amended with effect from 1st April 2006 to tax all cash gifts having aggregate value exceeding Rs. 50,000. Cash gifts also enjoy exemptions as is available for gifts-in-kind.