Legal Guide

Which Gifts from relatives are exempted from Income Tax?

by ezyLegal Editor · 3 min read

gift from relative exempt from income tax

Introduction 

  • The giving and receiving of gifts are an essential part of Indian celebrations. These presents can take the form of monetary ones (cash, gold, diamonds) or financial ones (shares, land, etc.). 
  • Up to a limit of Rs. 50,000, the gifts from relatives are exempted from Income Tax. There is a possibility that you will be required to pay taxes on the gifts by relatives and not be exempted from Income Tax that you are given. 
  • If the value of the gifts you received is more than 50,000, you will be forced to pay taxes on them. The first 50,000 of any gifts from relatives are exempted from Income Tax; however, after this threshold is exceeded, the full value of any gifts from relatives are not exempted from Income Tax and received is subject to taxation.

Gifts from relatives are exempted from Income Tax.

The topic of whether or not gifts from relatives should be exempted from Income Tax is one that frequently arises in conversation among taxpayers. 

The gifts from relatives are exempted from Income Tax and which is discussed here. From the perspective of taxation, gifts may be broken down into the following categories:

  1. A “monetary gift” can be defined as any sum of money that is given to one without any expectation of return, and such gifts from relatives are exempted from Income Tax.
  2. The phrase “gift of movable property” can be used to refer to some immovable properties that were obtained without payment for their use, and such gifts from relatives are exempted from Income Tax.
  3. “Specified moveable properties obtained at a discounted price” can also be referred to as “movable property received for less than its fair market worth,” and such kind of gifts from relatives are exempted from Income Tax.
  4. The term “gift of immovable property” can be used to refer to immovable properties that were obtained without any payment being made for them, and such kinds of gifts from relatives are exempted from Income Tax.
  5. The receipt of immovable property for an amount that is less than the property’s worth as determined by the applicable stamp duty might be referred to as “immovable property obtained for less than its stamp duty value,” and such kinds of gifts from relatives are exempted from Income Tax.

When gifts from relatives are not exempted from Income Tax?

Any sum of money received without consideration by a person or HUF (i.e., monetary gift may be received in cash, check, draught, etc.) will be subject to taxation, and gifts from relatives will not be exempted from Income Tax if the following requirements are satisfied:

  • Amount of money obtained for free without any regard being given.
  • The total worth of such sums of money received during the year is greater than 50,000 Indian Rupees (Rs.).
  • Even though the provisions relating to gifts from relatives are exempted from Income Tax apply in the case of every person, it has been reported that gifts made by a resident person to a non-resident person are claimed to be exempt from taxation in India because the income does not accrue or arise in India. 
  • This is the case even though the provisions relating to gifts from relatives are exempted from Income Tax apply in the case of every person. 
  • This was done to ensure that such gifts made by residents to a non-resident person are subjected to tax in India.

Gift Deed Registration

  • A gift deed registration is an agreement used to gift property or money. Contributors can willingly gift mobile or immovable property to recipients via gift deeds.
  • A gift deed registration permits the owner to give the property to anybody and eliminates succession or inheritance disputes. 
  • The gift deed registration charges must be paid according to the procedure. One must consult a lawyer to know the gift deed registration charges. 
  • A registered gift deed is also proof in itself, and unlike a will, property transfer is quick, and you won’t need to travel to Court for gift deed execution, saving time and easy transfer for gifts from relatives are exemptions on Income Tax.

After paying the requisite sum, the gift deed must be printed on stamp paper and registered with the registrar or sub-registrar for a successful gift deed registration so that the gifts from relatives are exempted from Income Tax.

How does the process of gifting work and Legal Consultation for the Gift Deed Registration?

The act of giving a gift to relatives is exempted from Income Tax and may be broken down into three distinct stages:

  • Drafting a gift deed registration 

The procedure of making a gift begins with the drafting of a gift deed as the first stage. Due to the fact that he or she will be responsible for preparing the gift deed, legal consultation is absolutely necessary for this scenario.

  • Acknowledgment and Acceptance of the Property
  • The applicable legislation mandates that the donee must, during the donor’s lifetime, accept the asset or property that is being given to them by the donor. In the event that the donee declines to accept the property from the giver, the gift deed will lose its legal standing and be rendered useless. 
  • Therefore, the right set of drafting by the legal consultant is required for a successful registration for the gift from the relatives to be exempted from Income Tax.
  • Registration
  • According to subsection 123 of the statute governing the transfer of property, an unregistered gift deed cannot under any circumstances be considered a legally binding instrument. 
  • To attest to the legitimacy of the giving procedure, you are required to have two witnesses present at all times to transfer the said object so that the gifts from relatives are exempted from Income Tax.

Conclusion 

Any income that is generated as a result of the gifts from relatives are exempted from Income Tax if the gift is below Rs. 50,000. When a person wants to give a family or any other person a portion of their property or any amount of money, it is strongly advised that they create a gift deed. 

According to the Act, a relative does not include someone who falls beyond the scope of the meaning of the term. Gifts that Non-Resident Indians (NRIs) receive are taxed as well. This implies that for the purposes of taxation in India, the origin of the gift is significant, despite the fact that the location of the recipient does not matter.

To get the gift deed enforced in the Court of law, it is essential that it must be registered. To ensure all the requirements to get the gift deed registered are met, one must consult a professional lawyer.

ezyLegal Editor

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