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March 5, 2021

Know which Gift are Taxable and How to make a Gift Deed

by Mahesh Mara in Income Tax

Know which Gift are Taxable and How to make a Gift Deed

Gift is transfer of existing movable or immovable property made voluntarily without consideration by one person to another. A gift is made by one person called the donor to another called the donee. At the time of making a gift there should not be any flow consideration between the donor and donee. The donee must accept the gift of the donor for the lifetime.

Where an Individual or HUF receives from any person or persons any gift, exceeding Rs. 50,000 in any previous year, as per income tax laws, the aggregate amount shall be taxable as Income From Other Sources in the hands of individual or HUF under section 56. As per the Income Tax Act gifts can be the following:

1. Any sum of money received:

Where the aggregate amount of money received in any previous year is more than Rs 50,000, the entire amount received shall be taxable as income from other source

2. Immovable property:

Where the person or assessee receives immovable property as gift and stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property shall be taxable as income from other source.

3. Other than immovable property:

Where the person or assessee receives any asset other than immovable property and aggregate fair market value of such asset exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property shall be taxable as income from other source

Under below circumstances gift received by a person is fully exempt i.e. tax free irrespective of whether the gift is made by a relative or not:

  1. Gift received under a Will or by way of inheritance
  2. Gift in contemplation of death of the donor;
  3. Gift from any local authority
  4. 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)
  5. Gift from any trust or institution, which is registered as a public charitable trust or institution under Section 12AA/12A
  6. On the occasion of the marriage of the individual
  7. By way of transaction not regarded as transfer under section 47 of the Income Tax Act
  8. From an individual by a trust created or established solely for the benefit of relative of the individual.
  9. Gift received from relative as per section Income Tax Act

Note:

  1. Section 46 is provision which covers list situation which is not considered as transfer under Income Tax Act and thus capital gain shall not be applicable
  2. Following are the persons covered under definition of relative as per Income Tax Act:
  3. Spouse of the individual
  4. Brother or sister of the individual
  5. Brother or sister of the spouse of the individual
  6. Brother or sister of either of the parents of the individual
  7. Any lineal ascendant or descendant of the individual
  8. Any lineal ascendant or descendant of the spouse of the individual
  9. Spouse of the person referred to in clauses (ii) to (vi).
  10. In case of a Hindu undivided family, any member thereof;

In case a person is receiving any favor or gift from their mother or father or any relative for very huge amount, it is advised to have the gift deeds to avoid any future income tax problems.

Gift deed is an agreement formed when a person gifts his/ her asset (property or money) to someone. It is prepared at the time of transfer of certain existing moveable or immoveable property made voluntarily and without any consideration from one person known as ‘donor’ to another known as ‘donee’. Below is the format of Gift deed.

Format of Gift Deed:

TO BE TAKEN ON 500 rupees stamp paper

G I F T   D E E D

BE IT KNOWN TO ALL THAT  I ____________________(Name of Donor) PAN NO ______________ (PAN of Donor) (S/o or D/o Shri _________________________) aged ___ yrs. Resident of __________________________________________________ on this ___ day of _________ 202_ voluntarily conveyed and transferred with all beneficial and interests by way of gift, out of natural love and affection to and in favour of my Son/ daughter  Shri ______________________ Resident of __________________________________________________________________________________________ Following assets have been transferred by me to my _____ (Relation with donee).

DETAILS OF ASSETS:

1.

2.

3.

4.

Neither I, nor my heirs or legal representatives shall henceforth have any claim or interest in the said asset.

In witness to hereof, I have executed this Deed of Gift which is irrevocable & binding on me.

ACCEPTED

DONEE (Name and Signature)                    DONOR (Name and Signature)

WITNESSES

1.

2.

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