When was gift tax abolished in India?

Gift tax was abolished in 1998.

Under what conditions are gifts tax-free in the hands of the recipient?

Gifts are tax-free if received from relatives, on marriage up to ₹50,000 from non-relatives, under a will or inheritance, from local authorities, or from institutions recognised under the Income Tax Act.

How is immovable property received as a gift taxed?

If the stamp duty value exceeds ₹50,000, it is taxable in the hands of the recipient. If sold, capital gains tax will apply based on the holding period from the date of purchase by the donor.

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Pay Taxes on Gifts: Essential Guide | Jaagruk Bharat

Q: What is a gift under India's Income Tax Act?

A gift is a voluntary transfer of assets from one person (the donor) to another (the donee) without any consideration.

Q: What happens if a monetary gift exceeds ₹50,000 from a non-relative?

The entire amount is taxable as “income from other sources” in the hands of the recipient as per applicable tax slabs.

Alankar Mishra

Author

Updated: 28-01-2025 at 6:10 AM

Pay Taxes on Gifts: Essential Guide | Jaagruk Bharat

A gift is something of a voluntary transfer of assets from one person (the donor) to another (the donee) without any consideration. According to India’s Income Tax Act 1961, gift tax is the tax payable by the donor on the gifts made by him or her under certain circumstances.

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What Is Gift Tax?

Gift tax is the amount of tax charged on gifts given to a person by someone who doesn’t receive back its equivalent. Gift-giving is a very important part of all the cultures in the world, especially in a country like India which is home to innumerable traditions and cultures.

What Is A Gift As Per The Income Tax Act?

The Income Tax Act of India defines gifts under specific terms and words that are given without expecting anything in return. All those are listed below in detail:

Monetary in the form of cash, cheque, bank transfer, etc.
Movable property like jewellery, shares, paintings, etc.
Immovable property like land, house, etc.

What Types Of Gifts Are Exempted From Taxation?

In India, the concept of gift income tax was abolished in 1998, but as per current laws, gift exemption in income tax is given under the following conditions:

Gifts Received From Relatives Wherein Relative Means:

spouse of the individual
brother or sister of the individual
brother or sister of the spouse of the individual
brother or sister of either of the parents of the individual
Any lineal ascendant or descendant of the individual
Any lineal ascendant or descendant of the spouse of the individual

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The following could be referred to as gift tax exemption from relatives,

Gifts received on the occasion of marriage from non-relatives up to ₹50,000.
Gifts received under a will or an inheritance.
Gifts received from local authorities or institutions recognised under the Income Tax Act.
Gifts received from any fund or foundation, university, other educational institution, hospital, other medical institution, or any trust or institution referred to in Sec. 10(23C).
Gifts received from trusts or institutions registered under Section 12AA.

Any monetary gift not covered under the above categories will be subject to tax in the hands of the recipient.

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What Types Of Gifts Are Taxable?

Certain gifts are subject to gift income tax. We have listed all those kinds of gifts below in detail.

Taxation Of Monetary Gifts In India

In the case of monetary gifts from a non-relative that exceed ₹50,000 and do not fall under any of the exceptions stated earlier, the amount is taxable as “income from other sources” in the hands of the recipient as per applicable tax slabs.

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Taxation Of Immovable Property Received As A Gift

Suppose an immovable property is received as a gift by an individual or HUF (Hindu Undivided Family) from a non-relative, and the stamp duty value of the property exceeds ₹50,000. In that case, the stamp duty value is subject to tax in the hands of the recipient.

If the property is sold, long-term or short-term capital gains tax will apply based on the period of holding. The period of holding will be calculated from the date of purchase by the previous owner (donor), and the cost of acquisition in the computation of capital gains must be deemed to be the stamp duty value on the date of the gift.

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Taxation Of Movable Assets Received As Gift

There is no explicit gift tax on movable assets, according to current laws in India. Suppose the total fair market value (FMV) of movable property received without consideration during a year exceeds ₹50,000 and the gift is from a non-relative. In that case, the entire FMV is taxable as “income from other sources” in the hands of the recipient.

Here, any income earned, such as dividends or interest accruing on the gifted asset or property, will also be clubbed and taxed in the hands of the recipient from the date of the gift.

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Taxation Of Gifts In The Hands Of The Donor

As mentioned earlier, the concept of gift tax has been abolished in India. As per current laws, gifts given to relatives are not subject to any tax.

However, if an individual or HUF gifts an immovable property whose stamp duty value exceeds ₹50,000 to a non-relative, the amount exceeding this ₹50,000 limit will be subject to tax in the hands of the donor under the heading “income from other sources.”.

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Rate Of Taxes Applied On Gifts And Calculation

Type of gifts	Taxability	Taxable Amount on the gift
Monetary gifts	Valued at more than Rs. 50000	Entire amount
Immovable property	The value of stamp duty exceeds Rs. 50,000	Value of stamp duty
Immovable property (bought at a lower price than the stamp duty’s worth)	The value of stamp duty exceeds Rs. 50,000 which is more than the purchase price	The difference amount of the stamp duty and purchase price
Movable Property	Market value is more than Rs. 50,000	Market value
Movable property (purchased by the donor after gifting)	The market value is more than Rs. 50,000 than the purchase value	The difference between the market value and purchase price

Who Is Eligible To Pay?

In some circumstances, the individual who receives the gift must pay gift income tax. Those circumstances are mentioned below:

Anyone receiving monetary gifts of more than Rs. 50000 would need to add it to their income tax.
The market value of the gift exceeds Rs. 50000.

Taxation Of Gifts In India For NRIs

There are no separate laws for Non-resident Indians. Gift income tax is imposed based on the amount of gifts not by whom the gift is received.

Conclusion

Section 56 (2)(VI) of the Income Tax Act covers the taxation rules on gifts, from movable assets to properties. Though gifts are exempted from the gift tax, if the gift value exceeds Rs 50,000, you are liable to pay according to your tax slab.

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