Gift Tax.. All about it

With the demonetization noose dangling around everyone’s neck, people with huge cash stack held up in their vaults are rushing around their CAs office to understand the best way to get rid of it. One of the easiest ways is to distribute or spread your unaccounted cash as gifts with a back dated gift deed. A lot of people misuse this system to launder money, accumulate black money, and create anonymous properties in the name of non-existing relatives. However, it is not easy and viable option in all cases. We would today discuss more Taxation on gifts received.

How do you define a Gift? 

A "Gift" means transfer from one person to another of any existing movable or immovable property without any coercion or consideration in money or money's worth. It includes any receipts below Rs. 50,000 each year in cash, movable or non-movable assets. It includes land, building or flat. Movable assets also include security market instruments, jewellery, art pieces or paintings

How are gifts taxed?

Cash gifts received beyond Rs 50,000 in a financial year are taxable. The tax is charged as per the personal slab.

In case of non-movable assets, the difference between fair market value and price paid for acquisition is payable if the stamp duty is more than Rs 50000.

For movable assets, the entire value is taxed if it above Rs 50000. 

When gifts received tax exempt?

a)Gift received from relatives – blood relatives, spouse and lineal ascendants/descendants.

b) Gifts received on the occasion of marriage.

c) Gifts received under will or by way of inheritance.

d) Gifts received in contemplation of death of the payer.

How to document Gift transactions on Registered Deed or plain paper?

A gift deed is a written proof in which the donor transfers title to the donee of the asset without any payment or consideration. It talks about the transfer of legal title of the property where the consideration is not monetary but transferred out of love and affection. Except immovable property, where a registered instrument is necessary, all other assets can be transferred with simple writing on plain paper.  

We would like to sum it up saying that transferring asset to immediate family members or loved ones via gift deed has its own implications in taxes. So it is very necessary to clarify all your paper work before you accept any gift.

Regards 

Saarthi Financial Planners