Earnings Tax on Presents: Computation & 7 Exemptions

If an individual receives Presents (both in money or in variety) from any particular person, present tax could be liable to be paid by the particular person receiving the presents. Such earnings could be taxable within the 12 months through which the present is being obtained and taxable below head earnings from different sources. After including this to earnings below head different sources, the gross whole earnings could be computed and the tax could be levied on the gross whole earnings as per the earnings tax slab charges.

  • Really useful Learn: Earnings Tax Slab Charges

Exemption from levy of Earnings Tax on Present

Earnings Tax on Present obtained by an Particular person or HUF is ruled by provisions of Part 56(2)(x) of the Earnings Tax Act. As per the provisions of this Part, Present Tax won’t be levied below the next 7 circumstances:-

  • 1. Presents obtained from Family

Present obtained from Family is totally exempted from the levy of tax and no earnings tax could be levied on such Presents. To take away any confusion relating to the classification of Family, the Earnings Tax Act has very clearly laid down that  in case of People, solely the next could be handled as relative for the aim of claiming exemption from cost of Present Tax:-

  • Partner of the Particular person
  • Brother or Sister of the Particular person
  • Brother or Sister of the partner of the Particular person
  • Brother or Sister of both of the mother and father of the Particular person
  • Any Linear ascendant or descendent of the Particular person
  • Any Linear ascendant or descendent of the partner of the Particular person
  • Partner of the particular person talked about above

In case of HUF, all members could be thought of its kin.

There isn’t a most restrict on the worth of presents obtained to be exempted from Present Tax. All presents obtained from kin (no matter worth) are exempted from the levy of Present Tax.

  • 2. If the mixture worth of presents obtained is lower than Rs. 50,000

If the mixture worth of presents (whether or not in money or in variety) obtained from an individual or individuals (besides kin as specified above) in any monetary 12 months doesn’t exceed Rs. 50,000/-, then such presents usually are not liable to Present Tax. Nonetheless, if the worth of presents obtained exceeds Rs. 50,000/-, then the complete present so obtained is taxable as Earnings from different sources.

For eg: Mr. A receives present from Mr. B price Rs. 30,000 and from Mr C price Rs. 10,000. On this case, no tax could be levied as the mixture worth of presents obtained is lower than Rs. 50,000.

Nonetheless, in case the worth of presents obtained by Mr A from Mr. B was Rs. 40,000 and from Mr. C price Rs. 20,000, earnings tax on such presents could be liable to be paid as the mixture worth exceeds Rs. 50,000. In such a case, present tax could be levied on the mixture determine i.e. Rs. 60,000.

  • 3. On the event of Marriage of the Particular person

Presents obtained by a person on his personal marriage are totally exempted from the levy of Present Tax. It has additionally been clarified that the presents obtained by an individual on his personal marriage are exempted and never on the wedding of their son/daughter/brother/sister.

  • 4. Present Tax on Property obtained

Present Tax on Property obtained in variety could be levied within the following method:-

  • In case the property is obtained as a right being paid by the particular person receiving the present, the stamp responsibility worth/truthful market worth of the property could be taxable (supplied the stamp responsibility worth exceeds Rs. 50,000)
  • In case half consideration is being paid by the particular person receiving the present, and the distinction between the half cost made and the stamp responsibility worth/truthful market worth is greater than Rs. 50,000/-, such distinction could be taxable. (Really useful Learn: Tax on Property Transactions registered under Circle Charge)

In case of Immovable Properties, the stamp responsibility worth could be thought of and in case of Movable Properties, the truthful market worth could be thought of.

The that means of Property has additionally been outlined and Property means:-

  • Immovable Property being land or Constructing or each
  • Shares and Securities
  • Jewelry
  • Archaeological Collections
  • Drawings
  • Work
  • Sculptures
  • Another work of Artwork

Tax on Property obtained as Present would solely be levied in case of the above talked about properties. Thus, in case any property is just not listed above, tax on these properties obtained as present wouldn’t be levied. Examples of such properties on which present tax wouldn’t be levied are Automobiles, Laptops, and Mobiles and so forth.

5. Presents obtained below a Will or by the use of Inheritance or in contemplation of dying of the payer

Any quantity obtained below a will or by the use of inheritance or in contemplation of dying of the payer is totally exempted within the fingers of the particular person receiving the present. There isn’t a most restrict on this case and the entire present obtained is taken into account as tax free.

6. Presents obtained from any Native Authority as outlined in Part 10(20)

7. Presents obtained from any fund or basis or college or different schooling establishment or hospital or different medical establishment or every other belief or establishment referred to in Part 10(23C) or Presents obtained from any fund or Establishment registered below Part 12AA

Capital Positive aspects on Property obtained/transferred as Presents

Within the fingers of the particular person giving the present

If an individual offers present to a different, then such present wouldn’t be considered switch and subsequently no capital positive factors would come up within the fingers of the transferor i.e. the one who is giving the present. And subsequently, on the time of giving the present, no tax could be required to be paid by the particular person giving the present.

Within the fingers of the particular person receiving the present

  • The Value of acquisition within the fingers of the particular person receiving the present could be the identical as the price of acquisition within the fingers of the one who gave the present.
  • For the computation of interval of holding, the interval of holding within the fingers of the particular person giving the present would even be included.

 

 

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