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Monday, April 18, 2011

GIFT TAX IN INDIA

Gift tax in India is synchronized by the Gift Tax Act which was constituted on April 1, 1958. As per the Gift Act 1958, all gifts in excess of ` 25,000, in the form of cash, draft, check or others, received from one who doesn't have blood relations with the recipient, were taxable. However, with effect from October 1, 1998, gift tax got demolished and all the gifts made on or after the date were free from tax. But in 2004, the act was again revived partially. A new provision was introduced in the Income Tax Act 1961 under section 56 (2). According to it, the gifts received by any individual or Hindu Undivided Family (HUF) in excess of ` 50,000 in a year would be taxable.

According to the law, individuals can receive gifts from the following sources:
  • Relatives or Blood Relatives
  • At the time of Marriage
  • As inheritance
  • In contemplation of death
Though Gift Act 1958 was not initially applicable to Jammu & Kashmir, however the current clubbing provisions in the Income Tax Act 1961 would be applicable to gifts of movable properties in the said state as well.

Gifts Exempted from Tax

Gifts are exempted from India gift tax in the following cases:
  • The gift was given by a blood relative, irrespective of the gift value.
  • Immovable properties located outside the country.
  • Individual: is an Indian citizen, who is originally a resident of India, or
  • No-individual is resident of India during the year of gift
  • Out of balance gift by NRI (Non-Resident Indian) in his Non-resident account.
  • Foreign currency gift of convertible foreign exchange, remitted from overseas by an NRI to a resident relative.
  • Foreign exchange asset gifted by NRI to his/her relatives.
  • Special Bearer Bonds, 1991.
  • Saving certificates issued by the Central Government (notified as exempted).
  • Capital Investment Bonds up to ` 10,00,000 per year.
  • Relief Bonds gifts by an original subscriber.
  • Gifts of Certain bonds from the NRI to his/her relatives, which are subscribed in foreign currency (specified by the Central Government).
  • Gift to government or any local authority.
  • Gifts to any charitable institutions.
  • Gifts to notified temples, churches, mosques, gurudwaras and other places of worship.
  • Gift to children for educational purpose (Reasonable amount).
  • Gifts by an employer to its employees in the form of bonus, gratuity or pension.
  • Gifts under will.
  • Gifts in contemplation of death.

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