Blog

In this article, we will break down the tax implications of receiving gifts in India, particularly for individuals. Let's first define what constitutes a gift.

A gift refers to a sum of money, movable property (like jewelry or shares), or immovable property (such as a house, plot, or land) given without consideration or with inadequate consideration.

For both residents and non-residents, including NRIs, OCIs, PIOs, and foreign nationals, gifts received in India are subject to tax if their value exceeds INR 50,000. However, there are certain exceptions where the gift will be tax-free, regardless of its value:

Exemptions for Taxable Gifts

1. Gift from a Relative: Relatives include:
• Spouse
• Siblings (brother or sister) or their spouses
• Parents or their siblings
• Lineal ascendants or descendants of the person or their spouse
2. Gift received on the occasion of marriage.
3. Gifts received through a will or inheritance.
4. Gifts received in contemplation of the payer’s death.
5. Gifts from local authorities, trusts, foundations, universities, hospitals, and other recognized entities.
6. Gifts arising from corporate actions like demerger or amalgamation.

Key Points to Remember

1. Occasions Matter: Gifts received only on the occasion of marriage are exempt from tax. Gifts received on other occasions, like birthdays or anniversaries, are taxable.
2. Relatives Only: Gifts from individuals who do not meet the definition of a relative are taxable. This includes gifts from friends, and there’s ongoing debate whether gifts from maternal grandparents qualify as tax-free under the “lineal ascendant” rule.
3. International Gifts: If a gift is not exempt, it is taxable even if received from abroad.
4. Threshold of INR 50,000: If the total value of gifts received from various sources exceeds INR 50,000, the entire amount is taxable. For example, if you receive Rs. 5,000 each from 11 friends on your birthday, making a total of Rs. 55,000, this entire amount will be taxable.
5. Definition of Movable Property: Movable property includes shares, securities, jewelry, art, and bullion. Gifts of items like cars, mobile phones, or laptops are not taxable since they don't fall under movable property.
6. Gifts of Agricultural Land: NRIs, PIOs, OCIs, or foreign nationals cannot receive agricultural land as a gift. However, they can inherit or receive it through a will.
7. Documentation: It's advisable to have proper documentation for any gift transaction. For immovable property, a gift deed should be executed, and applicable stamp duty paid. For movable property or cash, a plain gift declaration is sufficient, but it should mention the relationship and other details clearly.
8. Revocable Gifts: If a gift is made to a spouse, daughter-in-law, or is a revocable gift, any income generated from the gift will be clubbed with the donor's income under the provisions of the Income Tax Act.
9. No Gift Tax: India does not impose a specific "gift tax." Instead, taxable gifts are taxed under the head "Other Sources of Income," based on the applicable income tax slab rates.

This article provides an overview of the basics of gift taxation in India. If you have any concerns or doubts, it's always best to seek professional advice to ensure you’re complying with the law.

Disclaimer: Aim of this article is to give basic knowledge about the topic to people who are not in touch with Indian tax norms. When anybody is dealing with these kinds of cases practically, he shall consider all relevant provisions of all applicable Laws like FEMA/Income Tax/RBI /Companies Act etc.

If you have any further questions or need assistance, feel free to reach out to us at admin@ushmaassociates.com or info@nricaservices.com, or contact us via call/WhatsApp at +91 9910075924.

"Stay Updated, Stay Tax-Ready!"