Gifts in kind worth over Rs50,000 also taxable from 1 October

Any gift-in-kind, whether an immovable property or any other property, of a value exceeding Rs50,000 will also become taxable in the hands of the donee from 1 October, a government release said today.

"The Income Tax Act 1961 has been amended with effect from 1 October 2009 to provide that any gift-in-kind, being an immovable property or any other property, the value of which exceeds Rs50,000, will become taxable in the hands of the donee," the release said.

The amended rules will apply to an individual or a Hindu undivided family (HUF), as income from other sources under clause (vii) of sub-section 2 of section 56 of the Act, it added.

Therefore, any such person who receives a gift of any such property on or after 1 October 2009 must pay the income tax due on the value of the gift and disclose the taxable value of such property in the return of income for assessment year 2010-11 and subsequent years, the release said.

The amended Act, however, has exempted the following types of gifts from tax:

• Gift from a person who is a relative;
• Those given on the occasion of marriage;
• Gifts under a will or by way of inheritance;
• Those gifted on contemplation of death of the donor;
• Gifts from any local authority as defined in the explanation to section 10(20) of the Act;
• Gifts from any fund or trust established under section 10(23C) of the Act; and
• Gifts from any trust or institution registered under section 12AA of the Act.

The Act has defined relative to include spouse, brother or sister, brother or sister of the spouse, brother or sister of either of the parents, any lineal ascendant or descendant, spouse of any of the relative (at clauses ii to v of the Act) of the individual. Gifts received from these relatives will not be subject to tax.

Earlier, cash gifts exceeding Rs25,000 were subject to tax with effect from 1 April 2004. Later the Act was amended with effect from 1 April 2006 to tax all cash gifts having aggregate value exceeding Rs50,000.

Cash gifts also enjoy exemptions as is available for gifts-in-kind.