Legal Guide

All about the Gift of immovable property under the Income Tax Act

by Bhavya Choudhary · 4 min read

gift of immovable property under income tax act

Gift of property under the Income Tax Act is defined as property (both movable and immovable) and money (cash, check, draught, etc.) received without or against insufficient consideration. Let’s examine what types of moveable and immovable property are subject to income tax:

  • Immovable property: land or structure or both (it does not include agricultural land in rural areas)
  • Movable property: shares, stocks, jewelry, archaeological collection, drawing, painting, any artwork, bullion, automobiles, etc.

In this blog, we will read about the Gift of immovable property under The Income Tax Act.

When are gifts of immovable property under the Income Tax Act that are subjected to tax?

  • Gifts of immovable property under the Income Tax Act are taxed if the value of all gifts received without consideration exceeds INR 50,000. The whole sum is subject to taxation. 
  • For example, if each of Rohan’s ten friends gave him a Gift of immovable property under the Income Tax Act of INR 7,000, the whole INR 70,000 is taxed since the total value of all gifts received exceeds INR 50,000.
  • However, if a Gift of immovable property under the Income Tax Act is received for insufficient consideration, it is taxed if the difference between the Gift and the consideration received exceeds INR 50,000. In such a scenario, the whole deficit amount will be taxed.
  • The Gift of immovable property under the Income Tax Act is taxable if it consists of capital assets in the recipient’s possession. Any Gift of immovable property under the Income Tax Act of stock, raw materials, or consumables that may be utilized by the receiver in the operation of his or her company are not considered capital assets and are thus not taxed.
  • The Gift of immovable property under the Income Tax Act would be subject to tax under the “other Income” heading professional tax slab chennaiand at the standard slab rates.

When are Gifts of immovable property under the Income Tax Act exempt from taxation?

In the following instances, Gift of immovable property under the Income Tax Act received are not taxable in the hands of the receiver, regardless of their monetary value:

Gift obtained:

  • from family members
  • On the occasion of the wedding,
  • By will/through inheritance.
  • From the local government.
  • A fund, foundation, university, other educational institution, other medical institution, hospital, or any trust or institution listed in Section 10(23C), as well as any trust or institution registered under section 12AA.
  • Relative
  • Spouse of the subject
  • Brother and sister (and their respective spouses) of both the person and his or her partner
  • Brother and Sister (together with their respective spouses) of a person’s parents
  • any ascendant or descendant of the person (including their respective marriages)
  • any ascendant or descendant of the individual’s spouse, including their respective spouses
  • Gifts from family are exempt from taxation.
  • A friend is not a relative as defined by the list; hence, gifts from friends are subject to tax (if other criteria of taxing gifts are satisfied).

The above are the Gift of immovable property under The Income Tax Act exempt from taxation.

Here is a synopsis of all the situations to aid comprehension of the Gift of both movable and immovable property.

Provision Regarding Gift Tax Stamp Duty for Gift of immovable property under the Income Tax Act

Stamp duty value must be included when calculating the tax on Gift of immovable property under the Income Tax Act. There is a potential that the stamp duty will be greater due to factors such as the length of time between the date the consideration was agreed upon and the date of registration. 

Consequently, for the purpose of determining gift tax stamp duty value as of the date of agreement setting, the consideration must be included if the following requirements are met:

  • If the consideration is paid in whole or in part by account payee check, bank draught, or electronic means on or before the date of the transfer agreement;
  • The date of the contract and the date of registration are distinct.

How to calculate stamp duty on a Deed gift?

Gift deed registrations in a state require payment of a percentage of the property’s worth as stamp duty. In UP, for instance, the recipient of a gift must pay 2% of the present’s value as stamp duty to get gift deed registration done. Suppose the declared worth of the property being donated is one crore rupee. The recipient would then be required to pay Rs 20 lakhs in stamp duty on the deed gift.

Conclusion

In India, it is common to receive and send gifts. In addition, gifts are regularly shared between friends and family on numerous holidays and events. It is crucial to highlight that such gifts may be subjected to tax for the receiver; one must thus take prudence so as not to be caught off guard. Legal consultation ensures that the exact amount of tax is paid on time. It is advisable to take legal consultation in terms of taxes for the Gift of immovable property under the Income Tax Act.

It becomes very difficult to calculate the tax with respect to the Gift. One must consult an expert lawyer to know the exact amount of tax that needs to be paid and to ensure payment of taxes on time.

Bhavya Choudhary

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Bhavya Choudhary

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