Whenever an Individual is preparing his income tax return, he/she in general tend to forget there are Income heads other than Salaries. The most common income not included in the income tax of the individuals would be interest earned from savings bank account and interest from fixed deposits. The interest from savings account is eligible for deduction under Section 80TTA up to INR 10,000. The interest from fixed deposit earned by senior citizens is eligible for deduction under section 80 TTB up to INR 50,000.
In addition to the interest income, the individuals should also consider gifts if any obtained by them, while filing their income tax returns. The gifts need not necessarily be claimed as gift. When a husband transfers an amount to his wife for any reason and when source of such amount is not included in his income tax return, then such amount is deemed to be a gift in the hands of his wife. Such transfer can be cash, immovable property or any other property. Let us see the taxability of such transfers in detail.
Taxability of Gifts
a) Gift in the form of CASH
When any person receives cash from another a sum of value more than INR 50,000 without consideration (i.e. gift), the entire sum received will be taxable in the hands of the receiver. If the sum received is INR 50,000 or less the sum received will not be taxable in the hands of the receiver.
If Mr. Z gifts Mr. X INR 55,000, MR. Y INR 48,000 and Mr. W INR 50,000 in the form of cash, it Is taxable only for Mr. X and it is not taxable for Mr. Y and W.
- b) Gift in the form Immovable Property (Land)
With Zero Consideration
When any person receives any immovable property from another without consideration and the stamp duty value of such immovable property received is more than INR 50,000, then the stamp duty value of such immovable property is taxable. If the stamp duty value of such property received is less than INR 50,000 then it is not taxable.
With Consideration less than stamp duty value
When any person receives an immovable property from another with a consideration(sale value) less than the stamp duty valueof such immovable property, the amount of difference between stamp duty value and the consideration is taxable only if it is more than higher of the two mentioned below:
a) Amount of fifty thousand rupees and
b) Amount equal to 5 percent of the consideration
1. Mr. A gifts Mr. B an immovable property with stamp duty value INR 40,000 and gifts another immovable property worth INR 60,000 to Mr. C
As the stamp duty value is less than INR 50,000 it is not taxable for B and it is fully taxable for Mr. C as the stamp duty value is greater than INR 50,000.
2 . Mr. D pays Mr. A INR 20,000 for an immovable property with stamp duty value INR 70,000 and Mr. E pays Mr. A INR 30,000 for an immovable property with stamp duty value of INR 90,000. Considering the excess of stamp duty value not paid by Mr. D and Mr. E, for Mr. D the excess value did not exceed INR 50,000 and hence it is not taxable and
for Mr. E it is taxable as the difference between stamp duty value and the consideration is in excess of INR 50,000 (considering higher of INR 50,000 and 5% of 20,000 (1000) in case of Mr. D and 5% of 30,000 (1500) in case of Mr. E
c) Gift in the form other than cash and immovable property
When a person receives gift other than cash and immovable property and if the value of such gift (property without consideration) exceeds INR 50,000 then the same will be taxable in the hands of receiver.
When a person receives gift other than cash and immovable property for a consideration which is less than the fair market value of such property and if such amount exceeding consideration is more than INR 50,000 then such sum exceeding consideration will be taxable in the hands of receiver.
a) Miss G gifts Ms. F jewellery worth INR 20,000
b) Miss G gifts Ms. H jewellery worth INR 1,00,000 for INR 40,000
Jewellery received by Ms. F is not taxable and jewellery received by Ms. H is taxable to the extent of INR 60,000.
The above provisions are not applicable when a person receives such cash or property:
a) From any relative – relative in relation to an individual means the husband, wife, brother or sister or any lineal ascendant or descendent of that individual.
b) On the occasion of the marriage of an individual
c) Under a will or by way of inheritance
d) In contemplation of death of the payer or donor as the case may be
e) From any local authority
f) From any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution or any other funds of the central or state government
g) From or by any trust or institution registered under Income tax Act
h) Any compensation or other payment, due to or received by any person, by whatever name called, in connection with the termination of his employment or the modification of the terms and conditions relating thereto.