Gifts, who would not like to receive them? Gift is something we all like to receive from our beloved ones. But, a very common and frequent question running in the mind of taxpayers is the taxability of gifts in India.
If I receive a gift from my father, would it be taxable in my hands? Do I need to pay gift tax on it?
If I gift a car to my Fiancée, is it taxable in the hands of my fiancée? What are the tax implications?
In this post let’s discuss – What is a Gift? How to know if the gift received by you is subject to income tax? List of Relatives from whom you can take Gift(s) without worrying about income tax implications. How does classification of property i.e., movable & immovable has an impact on Gifts? – Let’s make this simple and easy to understand 🙂
What is a Gift?
A gift is Money or House, Shares, Jewellery etc. that is received without any consideration, or simply an asset received without making a payment against it and is a capital asset for the Recipient. It can be in the form of cash, movable property or immovable property.
(A capital asset typically refers to anything the individual owns for personal or investment purposes.)
The person who is giving a gift is called the ‘Donor‘ and the person receiving the gift is known as ‘Donee‘.
Do I have to pay income tax on Gift?
Below are the important points that you should be aware of regarding tax implications on Gifts.
- Gifts up to Rs 50,000 a year: A recipient will not be assessed to any tax if the value of gift is less than Rs 50,000 a year irrespective of who gifts the money. Also, you need to add the total value of all the gifts received in a financial year and if the total value is less than Rs 50k then it is exempted from income tax.
- Gifts from Relatives : Below is the list of ‘Relatives’ from whom you can receive gift(s) and there is no need to pay any income tax; (you can receive unlimited monetary or non-monetary gifts).
- Brother
- Brother’s Wife
- Sister
- Sister’s Husband
- Spouse (Your wife / Your husband, if married)
- Spouse’s Brother
- Spouse’s Brother’s wife
- Spouse’s Sister
- Spouse’s Sister’s husband
- Spouse’s Father
- Spouse’s Mother
- Spouse’s Grand Father
- Spouse’s Grand Mother
- Spouse’s Great Grand Father
- Spouse’s Great Grand Mother
- Mother
- Mother’s Brother
- Mother’s Brother’s Wife
- Mother’s Sister
- Mother’s Sister’s Husband
- Father
- Father’s Brother
- Father’s Brother’s Wife
- Father’s Sister
- Father’s Sister’s Husband
- Grand Father
- Grand Mother
- Great Grand Father
- Great Grand Mother
- Son
- Son’s Wife
- Daughter
- Daughter’s Husband
- Grand Son
- Grand Son’s Wife
- Grand Daughter
- Grand Daughter’s Husband
- Non Relatives (non-family) – If you receive a gift from an individual who is not a relative (any other person who is not in the above list is treated as non-relative for Gift tax purposes) then the value of the gift can be subject to income tax.
- Type of Gift
- Cash or Money – A gift can be in the form of cash or money. (Latest update : Cash Gifts above Rs 2 Lakh can be subject to Penalty u/s 269ST w.e.f 1st April, 2017, even if the gifts are from family members. Read : ‘Rs 2 Lakh Cash Transaction Limit | Details & Examples‘.)
- Movable (or) Immovable Assets / Property – The income tax Act clearly defines the list of immovable and prescribed movable properties for the purpose of Gift tax. If you receive a gift (movable or immovable) from a relative then no tax will be levied. However, if you receive a gift (movable or immovable) from non-relative then up to Rs 50,000 (stamp duty value of the immovable property or Fair market value of movable property) is tax-exempted.
- Land or building or both (immovable)
- Shares & other financial securities
- Jewellary (precious metals, ornaments, precious stones, etc.,)
- Archaeological collections
- Drawings / Paintings
- Sculptures or any work of Art
- Bullion – Gold bars, Silver bars etc.,
- None of the above – Any other assets which is not listed in the above list will not be charged to tax. For example : If you receive car as a gift from a relative or non-relative, there will not be any tax on it as ‘car’ is not listed in the prescribed list of movable properties as per the IT Act.
- Occasion – As per the provision of taxation of gifts, any Gift received from any person on the occasion of the marriage is not liable to income tax. There is no monetary limit attached to this exemption. But, taxes are applicable if gifts are received at the time of Engagement or marriage anniversary.
To summarize above points;
- If the total value of gifts received is less than Rs 50,000 in a financial year, no gift tax is applicable.
- If you receive gifts on the occasion of your marriage, no tax implications. The gifts can be from a relative or non-family member and movable/immovable ones.
- If you receive gifts from any of your family member (as in the list), no need to worry about tax implications
- If you receive gift(s) from non-family members, kindly first check if the stamp duty value or Fair market value of the gift is less than Rs 50k or not. If the value of gift (movable or immovable) is less than Rs 50,000 then no need to pay any tax on it. If it is more than Rs 50,000 then the entire stamp duty value of the immovable property or fair market value of movable property will be charged to tax in the hands of the receiver.
Examples
- Illustration 1 : Mr Salman receives Rs 1cr worth car as a gift from his friend on the occasion of his marriage. Is this gift subject to taxes?
- First check – Is it above Rs 50k? Yes.
- Second Check – Is it from a family member? No.
- Third Check – Is the gift (type) listed in the prescribed list of movable or immovable properties? No. Car is not listed in the prescribed list of movable properties. So, the gift is not charged to tax.
- Fourth Check – Is the gift received on the occasion of marriage? Yes. So, no taxes will be levied.
- Illustration 2 – Mr Salman gifts a Diamond necklace worth Rs 2 cr to his Fiancee (Katrina), is this subject to taxes in the hands of his fiancée?
- First check – Is it above Rs 50k? Yes.
- Second Check – Is it from a family member? No. Fiancee is not a family member.
- Third Check – Is the gift (type) listed in the prescribed list of movable or immovable properties? Yes. Diamond necklace is a movable property and the value is more than Rs 50k so the entire gift value is subject to taxes in the hands of Katrina.
- Fourth Check – Is the gift received on the occasion of marriage? No.
- Illustration 3 : Mr. Aamir gifts his house to his friend Kajol. The market value of the building is Rs. 8,40,000 and the value of the building adopted by the Stamp Valuation Authority for charging stamp duty is Rs. 9,00,000. What is the tax treatment in this case?
- In the given case, the property is a capital asset for Kajol. The property is received from his friend (friend is not covered in the definition of relative), property is not received on any specified occasions and the stamp duty value of the property exceeds Rs. 50,000. In other words, all the conditions required to tax the gift are satisfied and hence the stamp duty value of the property i.e. Rs. 9,00,000 will be charged to tax in the hands of Kajol. It will be charged to tax under the head “Income from other sources”.
- Illustration 4 : Mr. Kanhaiya received following gifts during the financial year 2015-16:
* Rs. 2,80,000 from his friend residing in Canada.
* Rs. 25,000 from his elder Sister residing in Bangalore.
* Rs. 84,000 worth of Shares from his friend residing in Varanasi . What will be the tax treatment of these gifts?- Rs 2.8 Lakh is taxable as he received the gift from non-family member. The gift of Rs 25k will not be charged to tax because ‘elder sister’ is covered in the definition of ‘relative’ and Gift of Rs 84k worth of company shares will be charged to tax. Shares are prescribed movable property and their worth is more than Rs 50,000. Also, the gift is from his friend who is not a ‘relative’.
Important Points
- The following list of gifts are fully exempted from Tax whether they are received as Cash, or any other form;.
- Gift received under a Will or by way of inheritance.
- Gift in contemplation of death of the donor.
- Gift from any local authority.
- Gift from any fund or foundation or university or other educational institution or hospital or any trust or any institution referred to in Section 10 (23C).
- Gift from any trust or institution, which is registered as a public charitable trust or institution under Section 12AA.
- Any sum received from relatives or on occasion of marriage, is not to be included under the head ‘Income from Other Sources’ while filing your taxes. There is no requirement to show these gifts in ITRs as it does not fall under the definition of Income chargeable to tax.
- But, if you get a property through a registered gift deed (wherein your PAN is quoted), you can show the value of the gift received as ‘Exempted Income‘ in ITR. This is to avoid any scrutiny by income tax authorities in the future. Also, whenever you receive any gift it is prudent to have gift deed executed.
- If you receive gift (cash/movable/immovable property) from non-family member which is above Rs 50,000 then you can show it under the head ‘income from other sources’. You have to pay taxes as per your income tax slab rate.
- Kindly note that rules of clubbing of income comes into picture if you gift a certain amount to your spouse, or minor children or Son’s wife. Any income earned by the recipient on the gift shall be clubbed with the income of donor (you).
I hope you like this post. Kindly share your views & comments. Thank you!
(Image courtesy of iosphere at FreeDigitalPhotos.net) (Post Published Date : 21-April-2016)
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Dear friends,
i am using icici salary account, my monthly salary is less than 12000 only ,so did not file any tax.
one of my friend doing business and every month he used to transfer some amount to my account through online only ( NEFT, IMPS) by this way my yearly credit exceeds more than 10 to 15 lakhs.
Now my doubt is will it be a problem for me .please clarify .
thanks in advance.
S.Raja
Suppose a friend Mr A gifts Mr B immovable property in 2010 in Mumbai for free with no consideration.
How shall tax be computed on it for Mr A & Mr B and at what rate.
Also now after gift received in 2010 by Mr B , he sold the same property in 2017 how will tax be calculated and at what rate. Will it be STCG or LTCG ? Further how can Mr B save tax on gains earned.
Thanx in advance.
Dear Nisarg .. The gift is not a tax-free one as it has happened between two friends and not relatives.
The receiver of the gift should have paid required taxes in 2010 itself.
Kindly consult a CA.
Sir
I received rupees 5 lakh from my father in August 2015 and I deposited same amount in my bank account. He was ill at that time and in April 2016 he died. He use to file income tax return till year 2012. After that his health issue started.
Should I disclose this in Income tax?
Dear Ali ..You can consider this as a gift amount ad it is tax-exempt.
Hello Sir,
Me and my wife are co owner of the one joint property. I’m a salaried person and taken a bank loan. I am getting benefit of interest and principal amount paying for housing loan while my wife receiving all the money from rented house.
Do I need to show the rented income while filing the income tax? or I not required to show the income as my wife is receiving the money.
Rent amount is around 1.44 L annually.
Thanks in Advance for response.
Dear Ashesh,
Yes, both of you have to declare the rental income in your ITRs in the ratio of ownership shares in the property.
Thank you Sir for your prompt response. It’s really an appreciated and helpful.
However, I ‘m still not clear about it.
As I am getting complete tax benefit of interest and principal amount, Do I need to show rental income under my income against rented property while my wife receiving all the rented money to her account. As she is house wife and she doesn’t have any other income so she is not filing ITR.
If still I need to show the income than can I show the cash gift to my wife of rent amount?
from where we can find the ratio of ownership shared in the property?
Thank you Sir.
Dear Ashesh,
As you are a co-owner of the property, you have to declare the rental income based on your share in the property.
If ownership share is not specifically mentioned in the Sale deed, it can be assumed as 50 : 50.
Read: Gifts & tax implications.
Thank you Sir.
Further to clarify, I can show complete interest and principal amount paid by me against the loan when filing ITR even if I show 50% of rented income?
Thanks!
Dear Ashesh ..As you are paying the EMIs solely, you can claim tax benefits 100% and do disclose the rental income as per your share.
Thank you Sir!
Do I need a Gift deed from my brother for the cash he gifted me. Cash amount is 1.4 Lac (Rs. 25000 + Rs 1,15,000 ). Apart from this he made 1.6 Lac cheque deposits in my account in the same financial year.
Dear Megha,
It is better to have it done, especially for Cash gift.
You may declare these amount in your income tax return (if filing) under Exempt income section.
My eder sister a US Citizen having no substancial income in india,can she give me a gift ? can she take loan from her husband i.e my brother in law as she is not having a big capital.
Dear AMIT ..Kindly take advice from a CA.
I have got married in Apr’16, but I have got blank dated cheque of Rs. 5lakh (amount within his previous year’s ITR limit) from my father-in-law on my wedding anniversary. How should I show this transaction to get it exempted from income tax (showing it under gifted income), i.e., date it 2months back (In FY16-17) and deposit it now (considering cheque validity as 3months) or should I date it as my wedding anniversary date and deposit in bank.
I need to utilise this amount by investing it in a property purchase in FY17-18. Can I do it.
Also confirm do I need to show it in my ITR, to keep away from IT dept. scrutiny/observation of any illegal source of income, if yes then in which FY ITR should I show it FY16-17 or 17-18.
Further suggest upto what amount can I show cash (shagun) received from various friends & relatives as a part of gift on my marriage in FY16-17 ITR (which need to be filled by Jul’17, I think!!) apart from above stated gift amount.
Since I am unable to understand all your articles in depth as a CA/finance analyst, request you to provide detailed answer to be able to understood by a common person like me 🙂
Regards,
Ashish
Dear Ashish,
Ideally, you should have deposited the cheque immediately after your marriage.
Gifts amount can be shown under Exempt income section of ITR.
For FY 2016-17, all the gifts (cash) received on the occasion of your marriage are tax-exempt.
Kindly read:
Which ITR form to use?
Cash transaction limit & penalty from April 2017.
I agree ideally I should, but kindly suggest submitting it now will make any IT dept. scrutiny issue/observation.
Also can I utilise this amount (R.s 5 Lakh) in investing in any property, will it levy any IT over it??
And in which ITR should I show it (FY16-17/17-18).
Regards,
Ashish Keswani
Dear Ashish,
Even if you back-date it say as in Feb 2017, it is 10 months after your marriage date.
You may or may not get the notice, as it is a cheque deposit and there is not limit as such for depositing a cheque in bank.
Which ITR form? – kindly refer to link that I have suggested….
mr.Srikant,
very glad to u as i learnt lot from ur responses.
here is my quary on Interest-free loan:
if i take interest free loan 9 Lacs (in cash) from my mother, a simple paper draft signed by both will be enough
or stamp paper or registration etc required, pl, clarify:
sir, further to my above quarry;
if i take interest free loan from my mother (she is house wife, with in exempt limit of income, without filling IT returns), simple paper draft signed will be enough, No stamp paper or registration required?
is it required to declare in my IT returns., pl., clarify,
Dear sudhakar,
Suggest you to get it done on Stamp paper and accept the money through non-cash mode.
thank u very much mr. sreekanth for v promt clarification,
my doubt was not cleared totally, (if i take interest free loan from my mother with duly signed stamp paper)
is it mandatary to declare in my IT returns? pl., clarify
Dear sudhakar,
No, it is not required.
thanks a lot mr.sreekant, pl, keep on this web
mr. srikanth,
here is a quarry on gift tax:
i gifted 10 lakhs (from my retirement benefits) to my spouse through bank check
now she is invested that money in shares & m/f on her account and capital gains are shown on her named account.
now, this taxable income will be treated as her income or else mine. pl. clrify
Dear sudhakar Ji,
If there is any taxable income on the invested Gift amount then it is clubbed to your income. Clubbing of income provisions do apply.
I have two married sons, three grandsons ( one adult and two minors) to whom I want to gift good amount of money which is my own earned and also recieved from my father after his death. Please advise me most suitable way of gifting to reduce my income and avoid clubbing also.
Thanks
Dear Mr Kapoor,
You can gift to all of them (Sons & Grand-sons) and there wont be any tax / clubbing of income implications to you.
However, kindly note that Income in respect of the property allotted to minor children till minority ends, shall be clubbed in the hands of the father
I wish to give Rs. 10 lakhs to an unemployed friend as he is in extreme need of it. Is gift deed the best way or would just giving him the money through online transfer suffice? Also what would be the procedure to make and give gift deed? Any charges or fees and taxes involved in it?
Dear Nik,
Making a gift deed is not mandatory but advisable.
Yes, you can transfer the money through online mode or can give cheque to your friend. You may mention these transaction details in Gift deed (if getting it done).
If you are registering a Gift deed then there will be Registration & Stamp duty charges.
Kindly note that your friend is liable to pay taxes on this amount.
Thank you very much for the prompt reply!
Also does my friend need to pay taxes if i loan the amount to him. He is unemployed and needs every bit of the money.
Once again thank you for your help.
Dear Nik,
In such a case, No.
But if you get any interest income, it is chargeable to tax in your name.
My Grandfather has a property in Delhi since 1980 from DDA.
Recently we have sold this property & goth the money in grandfather account.
My Grandfather has two sons, we all are thinking to buy two house in Noida , each for one brother.
For that my grandfather has given the cheques of equal amount to both the sons.
Now my question are:
1. Will both the brothers get Long term tax benifits if they use that money in buying a house within 2 years.
2. Is all the above things will valid, if they transfer the amount to grandson intead of son
Dear AB,
1 – No. As the property was in your Grandfather’s name, sons/grand children can not claim tax exemptions on the sale proceeds.
Read : How to save Capital Gain taxes on sale of Property?
2 – Are you referring to a WILL?
Thank you very much for your prompt reply
So that means, If children get the money from their parents(source of money is selling of property), they first have to pay tax on that money, post that they can use that money anywhere they want.
Is there any to reduce the tax implications?
Dear AB,
In your scenario, your grand-father has sold the property, so he has to pay taxes on Long term Capital Gains (if any), and then he can distribute the sale proceeds to his sons/grand children as Gifts.
Gifts are tax-exempt in this case.
Hi Sreekanth,
I received a phone worth 43k as a gift, and TDS was charged.
As per your article, gifts upto 50k are tax exempt. Kindly advice how to claim this gift tax
Dear Sandeep ..May I know who has charged TDS?
Or is it Service tax?
Dear Sir,
1) I was an NRE @2011 invested in my wife name . Since the NRE money is not taxable , will the money I gifted to my wife be clubbed with my income
2) Person receiving gift from family members need to submit return?
3) The Gift receiver received a CIB 403 notice and answered that the income is out of exempted.
4) After sending that compliance shall they have to file return for current year?
All the above cases the annual interest income is below slab limits.
Thank you for your answer
Dear Sekar,
1 – Taxable Income generated by such corpus is clubbed to your income and taxed accordingly.
2 – Are they tax assessees? Even if they are not, suggest to file ITR and disclose the gifts (especially high value ones) as ‘Exempt income’.
3 – Read: Non-filing of ITR notice – how to reply?
4 – Filing for current year depends on current FY income slab.
Dear Sreekanthji,
Thank you for your reply
How much charge for submitting past 3 years return to IT .?
Is it possible to submit return 2013-14 to till date ?
There is no compliance found in the relevant PAN
Dear Sekar,
Belated returns can be filed for previous two Financial years.
very educative site
Hi Sreekanth, nice detailed info on tax liability of gift received. I have one doubt, please clarify :
In Maharashtra under amendment of stamp act 2015 stamp duty on gift of residential flat to family member is reduced to only Rs.200/-. Now SON giving residential flat gift to his MOTHER – does this gift falls under this stamp amendment act. Thanks
Dear Yeshwant..Yes..
Sir, my friend directly paid cheque of Rs.5.70 lakh to the seller in year 2010 for buying the house property in native place as gift in the name of her wife. this house property sold by her in May’2016 for Rs.7 lakh and cheque payment received in her name and deposited in her bank a/c. My friend does not have written proof except direct cheque payment transaction. What to do now ??? What are the tax implication etc ???
Dear Mr Mewada,
Your friend’s wife has to pay the taxes on Long term capital gains.
Thank you Sir for your prompt reply.
My friend does not have written proof except direct cheque payment transaction.
I doubt that he didn’t declared in his ITR. How he will prove that the gift made to her wife ???
Sir, please guide.
Hello Sreekanth Garu,
I own a house which generates rental income everymonth. I would like to gift this to my wife say in the current year (2016). How would the rental income generated from this house is treated:
1.In the current year – Will it be clubbed to my income? Can I show this rental income in my wife’s name in 2016?
2.What would be the tax implications on the rental income from 2017 April onwards (New financial year)? Can the rental income be shown in my wife’s returns or will it be clubbed to my income as long as the house generates rental income?
3.Is there any other way to add this rental income to my wife’s income and show it in her returns than mine (I don’t think loaning will work as this is a immovable property)?
4.Can I write a ‘will’ in her name with the condition to transfer the property to her name with immediate effect? Is this legally possible?
5.If none of the above works, Can I make her co-owner of the house with 90% share in the house? What Process should I follow for this and how much stamp duty and registration charge I should pay?
Thanks,
R.A. Rao
Dear R.A.Rao,
1 – If you are the owner of the property, even if you gift the rental income to your spouse, you need to disclose such income in your Income Tax Return.
2 – Also, the gifted money, if she invests and receives any taxable income, such income will attract clubbing of income provisions.
3 , 4 & 5 :
* You can execute the Gift Deed and make her co-owner of the property.
* I believe you can create a Trust and then can give her the rental income through it. Kindly consult a CA.
Read: 5 ways of transferring your Real Estate property!
hello sir,
my qus is:- if i give my immovable property( Land) as gift to my brother, is it taxable at any end?.
if this land is transfer to his name in that case any stamp duty value is liable to pay.
and in future he want to sell that land. is there any issue in the capital gain received. ( count in my income)
or if he give any amount to me as gift it consider taxable or Not.
Dear vikas,
It is tax-exempt.
In future, if your brother sells the property, he has to pay the capital gain taxes (if any) and it is not you.
Read: 5 ways of transferring a Real Estate property!
I am an employee in higher tax bracket, I get business income, can I transfer the business income to my spouse online as gift and avoid being taxed myself on business income ?
Dear Rkumar,
You may have to file your ITR disclosing the business income also and then you can gift the profits/gains to your spouse.
Kindly not that ‘clubbing of income’ provisions will apply in this scenario. The taxable income generated (if any) on the gift income given to your spouse will be clubbed to your income.
Hello, My Wedding date is Dec’13 however I have cash deposits in my account in FY 14-15 for which I have received scrutiny. Can you please guide for amount (less than 30 Lacs) can I claim this as marriage gift.
Dear Piyush ..May not be allowed..
Hello Sir,
If I gift the money via cheque to my Daughter in law, will I get any tax exceptions? Is there any way to save tax by giving gifts to relatives?
Dear sree,
What documents are required for GIFTing in cash i.e by the donor , or with the Donee, from the point of view of IT rules.
Please give a sample copy …. ie while gifting cash below Rs 50000/- and in case of gifting cash More than Rs 50000/-
Thanks
GS Dhillon
Dear Dhillon,
Whatever be the amount, one can make Gift Deed. Below is the draft format. You may replace the Cheque mode to Cash mode.
GIFT DEED
I, _________________ (name of donor), S/o _________________ (father’s name), R/o
_____________________ (address), do hereby on dated __________ make a gift-deed
for a gift made on dated of ___________, Rs. ______/- (Rupees in word) out of love and
affection to my ____________ (mention the relationship & name of receiver), S/o or
W/o _______________, R/o _________________________.
I confirm that I am a resident Indian. I, further confirm that this gift is being made out of
my own funds standing to the credit of my A/c No.- __________ in
____________(mention the Bank name & address).
I, further confirm that the consideration for this gift is the love and affection for my
____________________ (mention the relationship & name of receiver) and no other
consideration.
I am an Income Tax assessee having PAN/GIR # A-984 / N and assessed with Income
Tax ward 1, Noida and this gift is made out of my past savings from profession in India.
Strictly Confidential 2 P A R Y & Co.
I further confirm that the gift has been made by Cheque No ___________ dated _______
drawn on ___________________________ (mention the Bank name & address). This
gift is irrevocable and I have no claim left whatsoever on the said gifted amount and
he/she is free to utilise it in any manner.
PLACE:
DATED: _______________________
(Donor name)
Witness:
The gift as stated above is accepted
______________________
(Name of receiver)
(Sample template Source : paryca.org)
Dear Sree
Thanx for prompt reply.
GS Dhillon
I’m blessed with a baby boy in August 2016.On name ceremony function I got cash worth Rs.1,00,000 from various relatives.I want to invest that amount in mutual fund as lumpsum investment.Is it taxable or not? How can I show this amount in IT assessment.
Dear Anusha,
Taxation of Gifts from relatives – It depends on the definition of relatives, plz go through the article.
You can invest in Equity mutual funds and if the MF units are held for more than 12 months, the gains made on these investments is tax-free.
Read: MF taxation rules.
I got money worth Rs.5,00,000 from my father in law in August 2015 on occasion of my marriage.I’m deposited that amount in September 2016 as fixed deposit.Is it taxable or not?How can I show this amount in my assessment.
Dear Suresh,
Gift is tax-exempt. The interest income on FDs is subject to taxes. You can show the gift amount as Exempt income in ITR and the interest income has to be shown under ‘income from other sources’ section of ITR.
I’m deposited in Bank exactly after one year.I think returns officer may raise objections on this.What’s your opinion on the gap of one year.what documents I have to show for this?Plz reply.
Dear Srinivas,
If you are unable to show it in ITR now, suggest you to get Gift deed done. Was this given through Cash or Online bank transfer?
It was given by cash in aug 2014.I’m deposited in Bank exactly after one year(Aug 2015) of my marriage.I’m not yet filed my returns of 2014-15,2015-16.If I shown in 2015-16 returns,returns officer may object about one year gap.How can I convince him and what support documents I have to shown?Plz clarify.
Dear Srinivas ..Then it can be tough to justify this..But if this is genuine suggest you to get Gift deed done and keep it with you for future use.
I saw your gift deed format which stated above.But how we can make a gift deed.How much stamp paper we have to use and how it can be registered?
Dear Mr. Sreekanth, I have received gift of Rs.16 Lakhs from my father after he sold his property and divided equally into 5 parts including my father and mother and three siblings. Please let me know what are the formalities i need to fulfill If i have to deposit Rs. 16 Lakhs which i received in the bank and is this amount exempt from tax?
Please answer my query……dated 23rd November 11:17am.
Dear Satya,
May I know if the Registered sale value of the property was Rs 80 Lakh?
Was the gift through Cash or online bank transfer?
Suggest you to kindly get Gift Deed done for the said amount.
Gift transaction is exempt from tax. You can disclose this amount as Exempt Income when you file your income tax return.
Dear Srikanth, Yes, the registered sale value is Rs. 80 Lakhs and 1% tds was deducted by the purchaser. The gift of Rs.16 Lakhs was given to me in cheque. As you have suggested to get gift deed done, should i have the gift deed registered in a sub-registrar office or can i have it notarized through a advocate? which one holds legal value?
Dear Satya,
Gift Deed is mandatory for the immovable property.
As in you case, Cash is a movable asset. So, registration is not mandatory. You can get it notarized.
A simple letter of making the gift by the donor and a letter from the donee accepting such gift should be sufficient for the gift of a movable property.
My Minor Son ( 3 months old) has received a cash gift from the close relatives (as per the list mentioned above) for an amount of around INR 297000/- at the naming ceremony held on 05-11-2016, I am holding this cash and have had already applied for Minor account to deposit this money his account where I am the guardian, am a salaried employee and paying taxes and have returns in place, please help me understanding on the below :-
1) Whether I can deposit the entire amount at one go into the Minor account, will it attract any IT notice etc.?
2) Will there be any tax implications or change in the my tax slab due to this ? Currently I am drawing INR 9 lakhs per Annum and after all deductions paying tax @ 10%.
3)Apart from the above even I have received Cash from same sources in gifts but the same is below INR 50k, I hope that will not be counted as a part of my income where I need to pay tax.
Dear Piyush,
1 – You can deposit. Kindly disclose this amount in your ITR (AY 2017-18) as Exempt income. However, kindly note that clubbing of income rule is applicable.
2 – If this amount is invested and if you get any taxable income then there can be tax implications.
3 – Yes, you can disclose this as exempt income.
Hi Sreekanth
if immovable property( worth 10 lakhs as per govt value ) gift deed is done to multiple people of the family(salaried) buy a father .. how tax implications for recipients in that case ?
questions:
1. all the family members should declare the total value in the ITR as tax exempted or should split the value by total people and then declare ?
2. should the recipients declare it every year or only the year on which they got the gift deed ?
3. what is the procedure for registering jewelry gifts from parents to son , by which recipients can be exempted from tax ?
this is from Hyderabad location
Dear Sravan,
1 – They can disclose their ownership share in the property (in Rs amount).
2 – In the year of receipt.
3 – Same gift deed format (but for movable property).
Movable properties such as vehicles, cash, jewels, ornaments, etc can also be gifted. Registration is mandatory in case of Gift of an immovable property but it is optional for movable property. A letter by the donor drafted on a plain paper describing on making the Gift and an acceptance letter from the donee showing his acceptance of the Gift received by him/her will be sufficient. The Gift of movable property can be made by a registered deed or by mere delivery of the property
I have received in total 10 lac sagan on marriage ( cash ) from friends and family like blood and non blood…. is it taxable ?
Dear jaspreet ..If you receive gifts (cash or non-cash) on the occasion of your marriage, no tax implications. The gifts can be from a relative or non-family member and movable/immovable ones.
Dear srikant,
If I gift 15 lacs rupee to my father by online transfer and my father will do investment in stock market.
Is this income is treated as my father’s income or mine?
Any other precautions I have to take to avoid interference from IT department?
Dear Leela,
Gifts to Parents are tax-exempt.
Further, if your father invests in say Shares, the gains (if any) are clubbed to his income only.
He may show this Rs 15 Lakh as an ‘Exempt income’ when filing his Income tax return.
You may preserve the bank statement which reflects this transfer for future reference.
In case of a friend gifts a car(i.e. pays directly to the showroom and gets the registration done on the name receiver) is this liable for tax?
Dear Shubham..Car is not listed in the prescribed list of movable properties. So, the gift is not charged to tax.
Ok thanks Sreekanth.
In case i need to gift it to my friend what is to be kept in mind, car has to be bought in his name and payment made to the dealer from my account right?
Dear shubham ..Yes. You may take tax expert’s opinion too 🙂
Hi Sreekanth,
I am looking if there is a way to avoid paying 30% tax on my FDs.
I am a 35 year man, in the tax bracket of 30%. I have about 25 Lakhs lying in a FD.
Can i “gift”this amount to my house-wife, via say online transfer to her bank account, and not have attract any tax?
And once this money is “gifted” in her bank account, can it be used to make a FDs and then subsequently claim exemption using say Form 15g/h?
Thanks,
Rahul
Dear Rahul,
If you GIFT the amount to your spouse, no gift tax is levied on such transaction.
But, the income generated by that amount is clubbed to your income and taxed accordingly.
However, if she invests that amount in tax-saving options or investment avenues where income is not taxable then the income is not clubbed.
For example : She can invest the gift amount in say ELSS Fund, the gains (if any) on this fund are tax-free. But she has to opt for the avenues based on her requirements/financial goals.
Dear Shreekanth,
My father gifted me 15 lacs rs. , which i have used for the repayment of housing loan. do i need to pay any tax on the same.
Dear Dev..It is tax-exempt.
Dear Sir
I want to understand something about gift tax
If i were to receive an immovable property as a gift from a “non relative” as defined worth Rs 25 Lakh. I understand i have to pay the Stamp Duty. Also i read that gift of immovable property from a defined ‘ non relative ” is taxable. I believe the Tax liability for a gift of Market Value of Rs 25 Lakh is close to Rs 6 Lakh. Now i don’t have so much money to pay as total amount of money in one year ( i have to arrange would be around 150000 for Stamp Duty and approx Rs 6 Lakh as Tax under ” Income from other sources” )
So am i missing out on anything or their is no solution ? Kindly respond for this unique problem at the earliest
Thanks in advance
Dear Saumil,
Very tricky one indeed!
Gifts are taxable in the hands of the receiver in India and not the giver.
As it is from a non-relative, the gift amount is added to your income and accordingly you have to pay the income tax as per your income tax slab.
Me too, helpless! I dont think you can escape from taxes.
One option is the person can write a WILL in your name.
Dear Sir
Thanks for your prompt reply
I would like you to clarify my understanding
As per my understanding the Municipal Value of the Property is Rs.25 Lakh . It means considering the Tax slabs, I ought to pay approx Rs 6 Lakh as Taxes (+/- 5%). REQUEST YOU TO PLEASE CONFIRM
Also if i can make you understand in short one of our relative (That relative doesn’t fall under the ambit of “relative” defined) had purchased a property for my benefit but kept his name. He is not that old for a WILL to materialize. Now he wants to transfer it in my name. But i am not in a position to pay a Tax of Rs 6 Lakh in a financial year. So is it so i can’t get it as a gift till the time i arrange for that money . (obviously i can pay tax after the transfer but certainly would be liable to pay in the Current Year itself)
Can you think of something. need an urgent help . Last resort i believe can be to take the flat in my name and apply a loan against the same property and pay the taxes. But i am sure their has to be a way out as certainly there would be instances where the receiver is in no position to pay such a huge amount ever)
Thank you so much Sir for responding
Dear Saumil,
As of now, I do not have answer to your query. Will try to get it from my CA friends. Meanwhile, you may also consult a CA.
In case if he/she suggest you a viable option then do let me know. It’s a learning for me too!
Noted Sir
Will have to find a way out. Will surely get back once i get a way out of this situation. In the meanwhile in case you find a solution to this, do revert .
Thank you so much
Regards
Dear Mr. Reddy,
I am an NRI. The present route of investing in stocks by PIS route is very difficult. Can I gift amount of more than 10lakhs to my Mother in law and through her invest in Stocks till the time I am and NRI.
Is there any issues you forsee in it.
Thanks & Regards
Dear Tushar ..You may do so. But kindly keep a note of the Gift transaction details for future references.
Thank you very much Mr.Reddy for your prompt response. I posted two queries on your blog and I thought I will get a response alert on email when you reply back to my post. However, I did not got any intimation …………….I just checked the blog after two weeks and saw you had already replied………..please can you check and inform whether there is any option in your blog to get an Email alert ……..Thanks once again ……….!!
Dear Tushar ..There has been some technical glitches w.r.t ‘blog comments alerts’ functionality. Our technical team is trying to resolve this issue. Thanks for letting us know this. Keep visiting!
Thank you once again Mr. Sreekant ……..!!
hello sir,
i want to gift 5 lakhs to my wife.she wants to make fd for the same in her name. will the income earned on fd’s will be her income or it will be clubbed with me.
if it will be clubed with me then what is the benfit of gifting to her as the tds will be deducted in her name. and if the income is clubbed then how many years i have to show the clubbed income.
Dear jot,
The interest income will be clubbed to your income.
The TDS deducted in her name can be claimed in ITR by her.
As long as the interest income gets accrued.
so how can i gift her if i dont want to club income with me. i want her income to be generted if i gift her the amt…
Dear Jot q … You may give this amount as Loan to your spouse.
then why it is written that
Gifts from Relatives : Below is the list of ‘Relatives’ from whom you can receive gift(s) and there is no need to pay any income tax; (you can receive unlimited monetary or non-monetary gifts).
Spouse (Your wife / Your husband, if married)
then what is the benefit of gifting if the income is to club with me.
Dear Jot ..Kindly note that gift transactions are tax-exempt. But the taxable income generated by such gifts (wife to husband or vice versa) will be subject to clubbing of income rules.
But if income which is generated is not a taxable income then it is tax-free in the hands of donor too.
For ex- If husband gifts Rs 1 Lakh to wife, which is invested by wife in say ELSS tax saving mutual fund, then gains (if any) from this fund is not taxable both in the hands of husband/wife.
Dear Shreekanth,
From what I can gather from above material, if value of a gift from non-relative is above 50,000/-, entire value of gift is taxable, not just the amount by which the value of gift exceeds 50,000/-.
Please confirm if this is correct.
Regards,
Anil.
Dear Anil,
Yes, the entire amount is subject to tax.
Dear Shreekanth,
My wife has picked up a job recently and her savings are inadequate to invest in savings under Sec 80 C. I intend to give her a gift of Rs 1,50,000/- from my earnings/savings, already taxed/taxable as per my tax bracket, so that she can invest in ELSS and reduce her own taxes. My reading of the matter is that the gift of Rs 1,50,000/- should not be taxable in her or my hands after investing in ELSS for the following reasons:-
(a) I am paying tax on it as per my tax bracket.
(b) ELSS is EEE, hence earnings are non taxable. On maturity she would be free to further invest corpus and earnings as she feels fit, probably in reinvestment in ELSS for future financial years. If she invests in any taxable scheme, of course she will have to pay tax as per prevalent rules.
Please confirm that above reasoning is correct.
Regards,
Anil
Dear Anil..Yes, your understand/analysis is correct.
Dear Sree
As always, the articles are well written. Thanks for educating masses.
one query… suppose wife is Housewife , has PAN, but is not income assessee. Suppose husband ( who is income tax assessee in higher bracket) gifts 1.5 lakhs to housewife, and she spends 50 K in SCSS, 50 k in PPF and 50 k in ELSS
Then in this case what will be tax liability of husband and wife respectively. please enumerate.
Thanks
GS Dhillon
Dear Dhillon,
Very good question!
If the income/gains on these investments is a taxable income then such income will be clubbed to husband’s income and taxed accordingly.
In the above case, interest income on SCSS is taxable income, so it is taxable in the hands of husband. The other two investment options generate income which is tax-exempt.
Dear Sreekanth,
Thanks for such an enlightening article. Please shed some light on gifts made to HUF. Can a Karta make gifts to his own HUF? If so, is there any limit?
Dear Munish,
Karta can make gifts. Gifts exceeding Rs 50,000 not chargeable to tax. But kindly note that clubbing of income rules apply.
The taxable income generated by such gift will be taxable in the hands of Karta/member.
Hello Sree,
You are doing a graet job.
I have a question
My father-in-law gifted me Suzuki Swift Dzire. Is it necessary to show this in ITR?
Thank u in advance.
Dear Sunil…If you receive car as a gift from a relative or non-relative, there will not be any tax on it as ‘car’ is not listed in the prescribed list of movable properties as per the IT Act.
Dear Sreekanth,
Excellent post.
Please tell me if I gift a good amount every year to my Adult daughter will there be any clubbing provision on interest earned by my daughter on the gifted amount OR the income will simply be treated as HER income for tax calculation purpose?
Dear Shib,
Gifts (including money) to an adult child are exempt from tax.
And if your adult child invests this money in assets (such as fixed deposits, PPF investments or purchasing any other asset) any income from these is taxable in the hands of the adult child only.
Clubbing provisions do not apply to Adult Children. Adult child is 18 years old or more.
1) I received tax free bonds & shares by ‘offline’ transfer to my own demat from my recently deceased grandmother’s demat account. She had signed the offline TIFD Transfer Form but died in Feb’16 before the actual transfer could take place. Hence, transfer was done post her demise in March’16.
2) Also, some Bank Fixed Deposits were in joint names with my Grandmother being 1st Holder & I being the 2nd Holder. Some FD’s were continued with transmission to my name & FD’s in SCSS where I was ‘NOMINEE’ were encashed & invested elsewhere. The demat transfer TIFD form also describes in ‘Reason for Transfer’ as ‘Gift’. Should such receipt be shown by me in my ITR? Is this taxable? Will both these cases be classified as an ‘INHERIRANCE’ or ‘GIFT? These was not specifically mentioned in my late grandmother’s will.
Please provide explanatory advice & oblige
Dear Sunny,
1 – Can be considered as GIFT.
2 – Inherited/Beneficiary.
Not taxable.
Hello Sreekanth,
Many thanks for your posts.
I was going through your comments and found one suggestion to give “interest free loan” to spouse in place of money as a gift to save on income tax on interest due to clubbing.
1. My wife is a housewife and I want to know that how can I give her interest free loan. Does she needs to show any business for this or it can be just transferred as it is?
2. Will I need to do any legal formalities for this?
thanks in advance,
JP
Dear JAI PARKASH,
No legal formalities as such. But its better to do online transfer or payment by cheque and charge ‘reasonable rate of interest’ on loan.
Ideally, a loan should have a purpose. Kindly note that she can use it for business or investment purposes too.
My Mother is selling her flat for 30 lakhs. can she make a will to transfer the money to her sons equally (as gift). Under the provision of gifting what shall be the IT implication considering the long term capital gain. She doesn’t want to invest in any property but just wants to share the money with sons. Plus advice as to if she can make a will now and do so?
Dear Sohail,
On the sale transaction, she has to pay capital gains taxes (if any).
If she gifts that amount to sons then it is tax-free in the hands of her sons.
Thanks for the reply. Request a detailed help as to how to undertake this transaction. Does she have to pay Capital Gain Tax first and then transfer the money? or she can transfer the money and the sons can repay their home loan (if any)?
Dear sohail..I believe that she has to pay CG taxes (if any).
Very good and informative
All ready posted comment i have not received reply
Informative. Thanks!
Hi Sreekanth,
Thank you for writing such an in-depth article. This is really important to know what is considered as a gift and if this is taxable or not. This will save you from the Trouble you get from a taxable gift you thought as non-taxable.
Thank you for sharing such awesome article with us. Keep up doing the nice work
Thank you dear Kalpana and keep visiting 🙂
Hi Sreekanth,
Thanks for such a insightful article. I have a query and looking for your detailed response:
My father is 75 yrs old and he is having investments in Post office MIS scheme and some fixed deposits. From MIS he earns around 72K and around 20K via FDs. Total income is around 90K in a year. I am the secondary applicant in MIS. My father being primary applicant, he shows all the returns in his ITR. Now my query is for the future. After demise of my father, i suppose i will be natural owner of all the investments? Also, i just have to pay taxes on the total amount (90k) that my father was earning earlier? Is there a way to save some tax here as i am falling in the highest tax bracket and this addition of 90K income in my ITR is a huge loss for me.
Dear Saurabh,
You may re-invest the inherited amount in better and tax-efficient investment avenues right? (based on your financial goals).
Read:
List of best Investment options.
Hi Sree,
Thanks for your response. Total inherited amount would be around 11 lacs. Please advise the best investment options so as to have lowest tax liability. Investment horizon – 10 yrs.
I am already investing 6000 rs in different SIP(monthly), 1.5 lacs in PPF and 1.5 lacs in sukanya samridhi. Last financial year i have invested around 6 lacs in tax free bonds. I have gone thru your article “list of best investment options”. This lists all the options that a individual have in India, but still i am not sure which one is best suited for me. I am currently earning around 10 lacs and year and my wife around 5 lacs a year. My father’s last MIS is maturing this August. I was a joint account holder in that account. After august do you think it is OK to invest in post office SCSS with my wife as nomination instead of me as she is in lowest tax bracket. Please advise
Dear Saurabh,
Kindly note that any gift to Daughter-in law is again taxable in the hands of Father (clubbing of income rules).
What I was referring to was, after inhering the amount you can re-invest it as per your financial goals (ex – mutual funds) instead of fixed income oriented products.
Also note that if there are no specific goals for your father and if he can afford to take investment risks (if he has sufficient periodic income to meet his fin requirements), he can invest in say a balanced fund or MIP fund or Debt funds etc.,
Hi Sree, Yes, it seems the best bet is to go ahead with some balanced funds. I was talking about days after my father. Till the time investment is under my father, we don’t have any issues.
Can daughter in law inherit funds provided she is joint account holder to some investments like MIS/SCSS/Bank FD/Post office FD etc. I would prefer to have all the investments that my father have right now be transferred to my wife after some unfortunate event since she is in lowest tax bracket and i am in highest tax bracket. My father’s current MIS in post office is going to expire in next few months, so if we do the next MIS/SCSS, with my wife as joint account holder, all the funds will be inherited by my wife. Please advise if my understanding is wrong.
Hope my query is clear. Thanks.
Dear Saurabh,
After going through our comments, I believe that the prudent thing is ‘your father can write a WILL mentioning only these investments in daughter-in-law’s name’.
The amount received through WILL is tax free in both the hands.
Hi Sreekanth,
Nice article. So, if the husband gifts cash over 50k to his wife, there is no tax but does he need to show this in ITR?
Regards,
Pradeep
Dear Pradeep..But the income generated on such gift will be clubbed with the income of the spouse (husband).
Example:
Suppose husband gifts Rs 5 lakh to his wife and if wife invests this money into fixed deposit at 10% interest per annum, which works out to be Rs 50,000 a year this is how it would work:
If the recipient is wife then the income earned i.e. 50,000 will be added to husband’s income for taxation, and he would pay taxes on that based on his tax slab. However if she reinvests this Rs 50,000 and earn Rs 5,000 (10% of 50,000) as interest, then the income on reinvestment, which in this case amounts to Rs 5,000 will be considered as her own income.
Thanks Sreekanth,
Logical (from taxation perspective) but a little weird. Since 5Lakh is now owned by wife but the husband has to pat the tax???
2 follow-up questions:
First, does this income of 50k on original 5 Lakh FD added to husband’s total income every year? Or just the first year of gift?
Second, is there an alternate way to include this 50k income to wife’s total income (obviously, to save tax) if the husband’s income falls into higher tax slab?
Dear Pradeep,
1 – Every year.
2 – One can give ‘interest-free’ loan to spouse :), instead of gifting.
Thats a good article about the exemption you get from gifts while filing Income Tax Returns. I can save some amount by getting gifts now 🙂
What the taxability if gift is received or made to HUF by its members ?
Dear Sunit,
It is tax-exempted. Gifts can be given to HUF by its members and it also possible for the HUF to make gift to any member of the HUF with the consent of all the members.
Dear Sree,
Very nice post.
Also I am glad to saw that you are post-fixing the “Post Published Date” with the post. 🙂
Que:
My father is a retired government employee (age 60+). Currently he did “X” amount (from retirement benefit) FD in SBI Bank. As his pension is going on; so that he came in 10% income tax slab. So he has to paid 10% tax on FD’s interest.
My mother is house wife (age 57+) and she don’t have any income.
Can we do following transaction to save tax on FD’s interest ?
1. My Father -> Gift “Y” amount to -> My Mother (through Net banking)
2. “Y” amount FD will be created on my mother’s name
NO . CLUBBING PROVISION GETS APPLIED, AND THE INCOME EARNED BY WAY OF FD INTEREST WILL CLUBBED
WITH THE INCOME OF YOUR DONOR,IE, YOUR FATHER
Dear Anup,
He can do so, but kindly note that
“Income on the gift received by Spouse/Minor Children – If a person decides to gift a certain amount to his spouse, or minor children then any income earned by the recipient on it shall be clubbed with the income of donor.”
Example:
If husband gifts Rs 5 Lakh to his wife and the wife invests this amount in Bank FD @ 10% pa interest rate.
If the recipient is wife then the income earned i.e. 50,000 will be added to husband’s income for taxation, and he would pay taxes on that based on his tax slab. However if wife reinvests this Rs 50,000 and earn Rs 5,000 (10% of 50,000) as interest, then the income on reinvestment, which in this case amounts to Rs 5,000 will be considered as her own income.
Dear SUBHAJIT BANIK,
Thank you very much your response.
———
Dear Sree,
Thank you very much your response.
We will skip this idea and will pay 10% tax on FD’s interest. And stay happy and relax with as it is.
Que: Is above same rule apply for following relation ?
* Father and Daughter
* Father and Daughter in Law
Dear Anup,
I believe that clubbing of income rules apply in the case of ‘daughter-in-law’ too and not in the case of ‘daughter’.