Taxability of Gifts received by an Individual or Hindu Undivided Family (HUF)
Any sum of money or property received by an individual or a HUF without consideration or a case in which the property is acquired for inadequate consideration.
As per the Income Tax Act, 1961 which was amended in 2017, any gifts received by any person or persons are taxed in the hands of the recipient under the head ‘Income from other sources’ at normal tax rates under section 56(2)(x).
From the taxation point of view, gifts can be classified as follows:
- Any sum of money received without consideration, is termed as ‘monetary gifts’.
- Specified movable properties received without consideration, is termed as ‘gift of movable property’.
- Specified movable properties received at a reduced price (i.e., for inadequate consideration), is termed as ‘movable property received for less than its fair market value’.
- Immovable properties received without consideration; is termed as ‘gift of immovable property’.
- Immovable properties acquired at a reduced price (i.e., for inadequate consideration), is termed as ‘immovable property received for less than its stamp duty value’.
Tax treatment of monetary gifts received by an Individual or Hindu Undivided Family (HUF)
Any sum of money received without consideration (i.e., monetary gift may be received in cash, cheque, draft, etc.) by an individual/ HUF will be charged to tax if following conditions are satisfied –
- Sum of money received without consideration. The aggregate value of such sum of money received during the financial year exceeds Rs. 50,000.
- Provisions relating to gift applies in case of every person, but gifts by a resident person to a non-resident are claimed to be non-taxable in India as the income does not accrue or arise in India to ensure that such gifts made by residents to a non-resident person are subjected to tax in India, the Finance Act, 2019 has inserted a new clause (viii) under Section 9 of the Income-tax Act to provide that any income arising outside India, being money paid without consideration on or after 05-07-2019, by a person resident in India to a non-resident or a foreign company shall be deemed to accrue or arise in India.
Cases in which sum of money received without consideration, i.e., monetary gift received by an individual or HUF is not charged to tax –
- Money received from relatives. Relative for this purpose means:
i) In case of an Individual
a) Spouse of the individual
b) Brother or Sister of the individual
c) Brother or Sister of the spouse of the individual
d) Brother or Sister of either of the parents of the individual
e) Any lineal ascendant or descendent of the individual
f) Any lineal ascendant or descendent of the spouse of the individual
g) Spouse of the persons referred to in (b) to (f)ii) In case of HUF, any member thereof
- Money received on the occasion of the marriage of the individual.
- Any distribution of capital assets on total or partial partition of a HUF
- Money received under will/ by way of inheritance.
- Money received in contemplation of death of the payer or donor.
- Money received from a local authority.
- Money received from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in section 10(23C). [w.e.f. AY 2023-24, this exemption is not available if a sum of money is received by a specified person referred to in section 13(3)]
- Money received from or by a trust or institution registered under section 12A, 12AA or section 12AB [w.e.f. AY 2023-24, this exemption is not available if a sum of money is received by a specified person referred to in section 13(3)].
- Money received by any fund or trust or institution any university or other educational institution or any hospital or other medical institution referred to in section 10(23C) (iv)/(v)/(vi)/(via).
- Money received as a consequence of demerger or amalgamation of a company or business reorganization of a co-operative bank under section 47.Note –
i) Gifts received on the occasion of marriage of the individual is not charged to tax. Apart from marriage there is no other occasion when monetary gift received by an individual is not charged to tax. Hence, monetary gift received on occasions like birthday, anniversary, etc. will be charged to tax.
ii) Gifts received from relatives are not charged to tax (meaning of ‘relative’ has been discussed above). Friend is not a ‘relative’ as defined in the above list & hence, gifts received from friends will be charged to tax (if other criteria of taxing gift are satisfied).
For example – Mr. X received monetary consideration as gifts from his 5 friends in a financial year which is as follows:
Mr. A – Rs 8,000, Mr. B – Rs 16,000, Mr. C – Rs 9,000, Mr. D – Rs 14,000 & Mr. E – Rs 13,000.Although the total amount received by Mr. X from his all 5 friends does not exceeds Rs 50,000 individually, but since the aggregate value of amount received from all the 5 friends exceeds Rs 50,000 in a financial year. The whole amount of Rs 60,000 will be added to his income & tax as per his income tax slab rates.
iii) Once the aggregate value of gifts received during the year exceeds Rs. 50,000 then all gifts are charged to tax – The important point to be noted in this regard is the “aggregate value of such sum received during the year”. The taxability of the gift is determined on the basis of the aggregate value of gift received during the year and not on the basis of individual gift. Hence, if the aggregate value of gifts received during the year exceeds Rs. 50,000, then total value of all such gifts received during the year will be charged to tax (i.e., the total amount of gift & not the amount in excess of Rs. 50,000).
Monetary gifts received from abroad
If aggregate value of monetary gift received during the year by an individual or HUF exceeds Rs. 50,000 & if the gifts are not covered under the exceptions discussed in earlier part, then gifts whether received from India or abroad will be charged to tax.
Tax treatment of Immovable Property received as gift by an individual or HUF
Immovable property received without consideration or for less than its stamp duty value by an individual or HUF will be charged to tax, if the following conditions are satisfied:
- Immovable property, being land or building or both, is received by an individual/HUF.
- Immovable property is a capital asset within the meaning of section 2(14) for such an individual or HUF.
- The stamp duty value (SDV) of such immovable property received without consideration exceeds Rs. 50,000.
- Such property is acquired for a consideration but the consideration is less than the SDV & the difference exceed higher of Rs. 50,000 & 10% of the consideration.
- Gift of immovable property will be charged to tax whether the property is located in India or abroad.Cases where immovable property received by an individual or HUF without consideration or for less than its SDV (by way of gift) is not charged to tax – the case of immovable property received by an individual or HUF without consideration or for less than its SDV (i.e. for inadequate consideration) which are not chargeable to tax is same as the case discussed above of monetary gift received by an individual or HUF is not charged to tax.
The only difference is that the phrase “monetary gift received by an individual or HUF is not charged to tax” has been replaced with “immovable property received by an individual or HUF without consideration or for less than its SDV (i.e. for inadequate consideration) which are not chargeable to tax”.
Tax treatment of Movable Property received as gift by an individual or HUF
Value of prescribed movable property received by an individual or HUF will be charged to tax, If the following conditions are satisfied:
- Prescribed movable property is received without consideration (received as gift).
- If aggregate FMV of such movable property received by the taxpayer during the year exceeds Rs. 50,000, then the FMV of the prescribed movable property will be treated as income of the receiver.
- Prescribed movable property means shares/securities, jewellery, archaeological collections, drawings, paintings, sculptures or any work of art and bullion, being capital asset of the taxpayer and includes Virtual Digital Asset (VDA).
- Nothing will be charged to tax in respect of gift of any item being a movable property other than covered in the above definition.
For example – Nothing will be charged to tax in respect of a television set, wrist watch, personal car received as gift because a television set, wrist watch, personal car is not covered in the definition of prescribed movable property.
- Property received from an individual by a trust created or established solely for the benefit of relative of the individual will not be taxable as gift.
- Property received by way of transaction not regarded as transfer under clause (viiac)/(viiad)/(viiae)/(viiaf) of section 47 will not be taxable as gift.Cases where gift of movable property received by an individual or HUF without consideration or for less than its FMV (by way of gift) is not charged to tax – the case of gift of movable property received by an individual or HUF without consideration or for less than its FMV (i.e. for inadequate consideration) which are not chargeable to tax is same as the case discussed above of monetary gift received by an individual or HUF is not charged to tax.
The only difference is that the phrase “monetary gift received by an individual or HUF is not charged to tax” has been replaced with “gift of movable property received by an individual or HUF without consideration or for less than its FMV (i.e. for inadequate consideration) which are not chargeable to tax”.
Tax relief to COVID-19 patients & their family
Finance Act, 2022 has been amended to give tax relief to taxpayers receiving financial help from their employers & well-wishers for meeting the expenses incurred on treatment of Covid-19 as explained below:
- Sum of money or property received for Covid-19 treatment from any other person – Any sum of money or any property received by an individual, from any person, in respect of any expenditure actually incurred by him on his medical treatment or treatment of any member of his family in respect of any illness related to COVID-19, shall not be charged to tax provided certain conditions as may be notified by the Central Government are fulfilled.
- Sum of money or property received by family member of a person who died due to Covid19 – Any sum of money or any property received by family member of a person who died due to Covid-19, the money or property so received shall not be charged to tax in hands of the family member where such money or property is received from the employer of deceased person.
- Where the money or property is received from any other person or persons, the exemption amount shall be limited to Rs. 10 lakhs in aggregate. Thus, where the aggregate amount of sum received from other persons during the previous year exceeds Rs. 10 lakhs, then the excess amount shall be taxable in the hands of a family member of deceased.
- The provisions shall be applicable only when the payment is received within 12 months from the date of death of the person & certain other conditions as may be notified by the Central Government are fulfilled.
- Meaning of Family, in relation to an individual, means the spouse and children of the individual and the parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual.
CRUX of all the points mentioned above of gift received in tabular form:
| Kind of Gift Covered | Monetary Threshold Limit | Quantum Amount Taxable |
| Any sum of money without consideration | Sum > 50,000 | Entire sum of money received |
| Any immovable property such as land, building etc without consideration | Stamp duty value* > Rs 50,000 | Stamp duty value of the property |
| Any immovable property for inadequate consideration | Stamp duty value* exceeds consideration by > Rs 50,000 | Stamp duty value minus consideration Exam-1 – Stamp duty value Rs 4,50,000 Consideration Rs 2,70,000. Taxable amount is Rs 1,80,000 (stamp duty value exceeds consideration by > Rs 50,000) Exam-2 – In Ex – 1, if consideration is Rs 4,10,000, taxable gift is Nil as stamp duty value does not exceed consideration by > Rs 50,000 |
| Any Movable property (shares/securities, jewellery, archaeological collections, drawings, paintings, sculptures or any work of art and bullion, being capital asset of the taxpayer and includes Virtual Digital Asset (VDA)) other than immovable property without consideration | Fair market value (FMV) > Rs 50,000 | FMV of such property |
| Any property other than immovable property for a consideration | FMV exceeds consideration by > Rs 50,000 | FMV minus consideration (Same example in case of immovable property can be referred) |
Provisions relating to Stamp Duty Value (SDV)
- For computing gift tax in case of immovable property SDV is what needs to be considered.
- SDV can be higher due to varied reasons & one of such reasons can be a considerable time gap between agreement fixing the consideration & date of registration.
- For the purpose of gift tax, SDV as on the date of agreement fixing the consideration need to be considered if the following conditions are satisfied:
a) Date of such agreement & the date of registration are different
b) Consideration either fully or in part is paid by way of an account payee cheque or bank draft or by using an electronic mode of transfer through bank account on or before the date of agreement for transfer.
Exemption from Gift Tax in tabular form as explained above
| Category of donee (recipient of gift) | Category of donor | Occasion covered |
| Individual (Gift from defined relative is not taxable for donee, income from such gifts may in some cases taxable in the hands of donor itself – Example clubbing provisions, deemed owner concept in house property etc) | Relative – spouse, brother and sister of self and spouse, brother or sister of parents or parents in law, any lineal ascendant or descendant of self or spouse, spouse of any of the relatives mentioned here. | NA |
| Individual | Any person | Marriage of Individual |
| Any person | Any person | Under a will or by way of inheritance |
| Any person | Individual | In contemplation of death of donor or payer |
| Any person | Local authority – Panchayat, Municipality, Municipal Committee and District Board, Cantonment Board | NA |
| Any person | From any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to Section 10(23C) | NA |
| Any person | Any charitable or religious trust registered under section 12A or section 12AA | NA |
| Any fund or trust or institution or any university or other educational institution or any hospital or other medical institution established for charitable/religious/educational /philanthropic purpose and approved by the prescribed authority. [Refer Section 10(23C) (iv) (v) (vi) and (via)] | Any Person | NA |
| Members of HUF | HUF | Any distribution of capital assets on total or partial partition of a HUF |
| Trust created or established solely for the benefit of relative of the Individual | Individual | NA |
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