Gift Tax in India – Rules and exemptions
Have you asked your friend to transfer Rs 60,000 to your bank account and have you settled offline through cash? Be careful, as income tax department may scrutinize and ask to pay income tax on the amounts received from your friend in your bank account. You should know the ground rules of Gift tax in India on how to deal them to prove that such transaction is already settled. Hence it is important to know about gift tax in India and its rules and exemptions. This article provides complete guide on Gift tax in India.
What is Gift Tax in India?
As per section 56(2) indicates any sum of money received exceeding Rs 50,000 without consideration (cash or kind) by individual or HUF is chargeable to tax as income from other sources subject to certain exclusions or exemptions. Such gift tax needs to be paid as per income tax slab applicable to individual.
Also read: What is Wealth Tax in India and who is liable to pay wealth tax
Various gifts which fall under Gift tax in India
1) Cash Gift exceeding Rs 50,000:
Any amounts exceeding Rs 50,000 in a financial year without consideration is liable for gift tax in India. Please note that the amount indicated need not be single transaction. All multiple transactions from multiple people would be clubbed to get this amount in a financial year.
2) Gift in the form of Movable property
Any items like jewellery, drawings, and paintings, transfer of share or securities would fall under movable property. Any gift given in the form of movable property falls under gift tax. Market value would be considered as gift value and necessary tax is applicable if it crosses Rs 50,000 in a financial year.
3) Immovable property gift
If you have received land or property exceeding Rs 50,000, it would fall under gift tax.
– Without consideration – Full value of the property would be considered as gift.
– Part consideration – Full value of property minus the amounts paid by you to acquire such immovable property would become the gift value.
– Stamp duty value of the property would be considered to assess the value of the gift amount.
Exemptions / Exclusions for gift tax in India
1) Gifts to relatives are exempted
Gifts given to relatives are exempted from gift tax in India. The “relative” definition as per Income tax act includes Parents, Brothers, Sister, Spouse, Children, brother/sister of your spouse, brother/sister of your parents, lineal ascendant or descendant of your spouse and spouse of people referred above.
Any gift received from above people defined as “relative” is exempted from gift tax.
2) Gift up to Rs 50,000 is exempted in a financial year
Any amount paid to any one up to Rs 50,000 is exempted from gift tax in a financial year. If the gift amount exceeding Rs 50,000, entire amount is taxable and not additional/incremental amount.
3) Gift given on wedding is not taxable
Gift received during wedding from anyone is not taxable.
4) No tax on gift received either through WILL or inheritance
If you have received any amount by way of gift through WILL or inheritance, it would not be taxable under gift tax.
Frequently asked questions on Gift tax in India
1) Gift received by minor children or spouse is taxable?
Any gift received by minor child or gift received by spouse, the same IT rules would apply. If they are exempted with any of the points indicated above, it would be treated as exemption from gift tax, else the amount would be clubbed with your income and necessary income tax as per your income tax slab needs to be paid. This is as per “clubbing” rules of income tax.
2) During emergency I requested my friend to transfer Rs 60,000 to my bank account, will it attract gift tax?
If you have taken loan from your friend and you have a proof that you have returned that money through your bank account, you need not worry. But if you have paid offline through cash, it is better to document and take necessary signatures from your friend so that in case of any IT scrutiny, these documents would be handful. If you cannot prove, IT dept has every right to include this as taxable income and you need to pay tax. Also if you have taken the amount as loan and not repaid within same financial year through your bank account, it is better to have a document that you have taken loan so that you can prove this to IT dept.
3) I have made a FD in my spouse or child name, will it attract gift tax?
Since this falls under “Relative” category, no gift tax is payable. However, since your spouse or child do not have income, the interest on such bank FD needs to be added to your income and necessary tax needs to be paid. This is as per “clubbing” provisions.
4) I have received gift from non relatives for Rs 51,000, do I need to pay tax on Rs 1,000 (Rs 51,000 minus Rs 50,000 exemption)?
No. Once the amount crosses Rs 50,000, you need pay tax on total amount of Rs 51,000 and not incremental amount.
You may also like: How to check income tax refund status online?
5) I have gifted the property to my wife and she sold after few years. Since she falls under “Relative”, she is not supposed to pay gift tax and even exempted from long term capital gain. Am I right?
From gift tax point of view, yes, she is falling under relative category, no gift tax is applicable. However, when she sold the property, any profits made would be clubbed with your income and necessary long term capital gain tax needs to be paid.
Conclusion: The above sample examples I have provided have become common in our regular life. Hence we need to be little careful in knowing what are the rules and regulations of Gift tax in India.
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Suresh
Gift Tax in India – Rules and exemptions
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receivedmy minor daughter received cash amount 48 thousand on birthday occasion by non relative ,amount is taxable ? Or exemted
I have 3 sons and I have a shop (building)I.e. immovable property,i am 72 years old man,now I want to give a gift to my youngest son(42)the immovable property is purched by me in the year 2000for RS.2Lac and at present the market value is about 12Lac. I think this is exempted from gift tax due to gift is made to blood relative.
If, My daughter age 8 years received Rs. 2 lakh from their Maternal Grand Parents as a gift I want to invest such amount in LIC, So, this amount is taxable to me(parents) or their maternal grand parents, suggest me.How I can manage this.
Sir,
I have received a piece of land as gift from my mother. She holded this land for 10 years. Please suggest that what happens when i sell this land within one month of receipt of this land. Would that attract some income tax or any other form of tax.
If yes, then please suggest the timeline for which i should hold it to avoid this tax.
Also please suggest as to what shall be the tax liability on me if i sell this property in a months time.
please give the rate details
sir i want to know when a second hand car is gifted from my friend whether can i claim depreciation on it? what should be the cost of asset in order to apply depreciation rates? what are such rates?
thanking you sir
1. Since your friend does not fall under relative definition as per IT act, gift is taxable. 2. Yes, depreciation can be claimed on the car if its put for the business purpose. 3. You can claim depreciation of 15% on written down of the car
Sir,
Hi. Want to know if wife sends money via wire transfer as gift for her husband who stays at UK an amount of Rs. 1,08,000, does wife needs to pay gift tax at india?
if yes whats the rate.
How it works.
if i want to give a gift of Rs.5,00,000 to my father is that exempted for tax what will be effect in both books
In a lucky draw with Malbar jewellers on 12 02 2015, my daughter won one kilo gold. I would like to know the following:
1. what is gift tax nd surcharge percentage?.
2 . whether tax is caliculated on retail price or bullion price of the draw date or delivery date?.
3. whther we can demand cash, instead of gold after deducting tax amount?.
4. whether tax is payable in our name or in jewellery shop name?.
5. whether we have to retain TDS certificate?.
6. suppose, if 1000 grams rate on a specific date is Rs.28.00 lacs, how much tax payable?.
I await ur response nd i would be thankful to u.
BSR Anjaneyulu, Senior Manager, indian Bank, Kalyan Nagar, Hyderabad
Gift Tax applicable If Sister/Brother Gift to his brother her/his asset Amount As Loans & Advance Cheque Through
Hi,
Would you please help to understand that If I gift money (or Gold/ELSS etc) to my spouse then will I be eligible for any exemption?
Thanks
Narendra
Hi suresh
A very well written and comprehensive article.thanks to u.
I want to know if there is any need for documentation of the gifts received, including cash (surely more than 50k), on my marriage so as to avail exemption u/s 56 of gift tax?
It may be required in case IT Department come for scrutiny of such funds.
I have gifted 2 lac to my daughter. She is more than 18 yrs old, has PAN number but has not filed any ITR so far. Will the interest earn in future to be clubbed with my income. Or can she show the interest income as income from other sources in her ITR.
I bought my friend who lives in india a lap top to play his games i live in the united states. Im worried that my gift if i send it will be a burden on him the lsptop cost 900.00
I have done my will that after my death, ALL MY BALANCE IN MY ACCOUNT TO BE GIFTED TO MY FRIEND.IT WILL BE IN LAKS.. AROUND 50LAKH.WILL IT BE TAXABLE.?
Rahul, Any amount received by your friend as gift is taxable (beyond limit indicated in the article)
Dear SIr, Thanks for the information. I am trying to find the least tax impact on my current situation. The house my mother owns has been demolished and reconstructed in to 4 units, of which 3 she is giving to 3 of her children. The units will be ready by end of 2014. If she gifts each of the new units as gift to her children would that be the better options for tax savings? Are there tax consideration for my mother we should be worried about? Any help would be helpful. Property in chennai.
Thanks nd rgds
Rajesh
Very informative artcle. One question here. Grandfather gifts rs. 2 lacs to grand daughter. I understand gift tax is not payable because of relative definition. What about the income tax on interest income on the gifted amount (as grand daughter keeps this amount in FD). Is the income clubbed in grandfather income. pl clarify.
Gopal, If grand daughter is tax payee, she can indicate the same in ITR. Otherwise, it would be clubbed with grandparent income and necessray tax needs to be paid.
Dear Sir,
My daughter 2.5 years old is undergoing treatment for cancer for more than a year. Now we are requesting some support from our friends in the form of donations for her further treatments.
Please let us know a legal way of getting this tax free? Friends would be from india and abroad. We are in india.
Will the below options help?
1)Create a child account in the name of my daughter & request all to transfer the money to this account? Will it be tax free irrespective of being less or greater than 50000
2) Create a child account in the name of my daughter & request all to transfer the money to this account ensuring it is less than 50000 from each of them
3) What about transfers to my account? Will it be tax free since it is going to be used for my daughters medical expense?
Your quick response is appreciated
Thanks
Senthil
Senthil, Very sad to hear this. Any amount given as gift to whoever it is other than relative does not attract gift tax upto Rs 50,000. This includes all transactions in a financial year. Pls consultant tax consultant where you can indicate an option to create a trust where all money received to trust can be spent for your daughter. It could be only an option which I am thinking, but may or may not be possible.
Sir,
Can we give loan to our friend with 0 interest and no time limit bound. do we have to pay taxes for giving such loans. what is the procedure to be followed to give loans
Hi, Interest free loans given to friends are not taxable as per gift tax. However necessary documents needs to be made and repayment to be done as per loan agreement.
Hi Suresh,
Thanks for the article, really great.
I have a question too, In the year of 2010 I was in USA, I had given Rs. 5L (equals USD) to one of my friend he was also in USA, My friend used this money to buy a property in India (Total property value Rs. 15L my share 5L and his share 10L) and document was made in his name since I was not available at the time and my name was no included in the property. Now we are planning to sell out the land.. how would I get that property, Can I register to my name saying this property was given to me as part of my money gave it to him as loan? pls explain
you can take your share after selling property.
Money received through gift can be used anywhere ?
Yes. As long as you are using for the purpose which is legal 🙂
Dear Mr. Suresh
I have a small query.
1) My grand parents want to gift amount more than Rs.50000 to my wife whether the same is exempt or its taxable. or
2) can my parent gift to my wife whether the same is exempt or taxable.
I want to give Rs. 500000/- to my wife. I am a retired employee and income from pension and interest on investments. My wife runs a business under propritorship and income tax payee. Additioonal income from investment whether will clubed to my income or she can pay income tax as per her IT slab.
Income from the gift given to spouse would be clubbed with your income and you need to be pay necessary tax. Best way is gift money to your spouse and ask her to invest money in tax free investnents like PPF, tax free bonds etc.
Mr Suresh, can my landlord gift me a property ? i have rent recepts aswell kindly advise
It would attract gift tax as you does not fall under relative category.
Mr. Suresh, if my first cousin gifts me via chq, would the amount attract gift tax? Is cousin brother covered under the definition of “brother”??
Bhavin, “brother” would be own brother and cannot be cousins.
Dear Sir
My Son who is a NRI has gifted me in US Dollar. I want to know A) what is the limit for such gift so received in Dollar B) will it be taxable under IT act and C) Upto what amount I can deposit in my savings bank account.
Thanks and regards.
Swapan, Any amount gifted by your son does not attract gift tax as you fall under “relative” category.
my mother wants to gift the house property which is on both my name & her nasme do i have to pay gift tax obn it
No. Since you are son/daughter, you fall under “relative” category and hence no gift tax needs to be paid
my mother and me owns joint name flat , can my mother gift her share of flat to her daughter in law ( my wife) my mother has first name on this flat, will there be any tax charged though we would registered the gift deed. i want to know if my mother or my wife would be charge any tax ?
i want to invest this in fd
my mother wants to transfer rs20 lac cash as a gift and i want take of rs20 lac. the interest rate is 9%pa and i would get rs180000. would my mother have to pa tax on this income.i am a student and do not have any income.
i have taken refundable loan or gift ammount rs 5,00,000 lacks from my friend .pl give me suggetion in respect of tax.
gift from father to major son of 15laks and intrest recieved on 15 lakhs thereon is taxale in son income or father income??Please help
Hello Mr. Suresh,
Thanks for writing such a great article. I have two questions for you. It may sound a little out of ordinary but I'm planning to gift someone a large sum of money (in lacs). I'm not related to that person in any way. Is there a way for the receiver to not pay gift tax on the received amount? Secondly, what's the current gift tax rate?
Thank you in advance!
Suresh T.
Suresh, The receiver has to pay gift tax as he is not falling in “relative” definition. The rates are indicated in the article.
Dear Sir,
Is gift given by daughter in law to mother in law or father in law free from gift tax ?
Thanks
S N Bartake
Hi Mr. Suresh,
Question 1 : I want to gift 7.50 lacs ( derived from sale of esop shares) to my mother and father (retired and no source of income) in their joint account who would then keep it in FD in their respective names and will opt for monthy interest for their daily expenses. Will there be any tax implications on me since I have gifted and on my parents since they may be getting the interest. Or will this interest component will be treated as my income.
question 2 : how do i document that this is a gift given by me to my parents.
Lohit, There would not be any gift tax. However since your parents does not have any income, clubbing provisions would apply and you may need to pay IT on interest earned from such gift. No document is required as you are giving gift to your parents
Thanks Mr Suresh for that reply. Also would like to ask if divorse settlement of Rs 15 lacs received by my cousion sister is taxable and will ahe have to file returns since she is a unemployed divorsee
Your cousin sister would get this settlement for her husband, this would not fall under gift tax.
Dera suresh..
1. First of all i want to thank u for writing such an informative blog. i have one small query.
2. I m a salaried person. My wife is a housewife ( not earning)..if i gift her rs 50000 she doesnt need to pay income tax on that…but will this rs 50000 will be deducted from my taxable income??
Amar, No. This is like gift given to your wife and she need not pay any gift tax. You would not get any exemption in your taxable income
Sir
If i received a cash/house from my aunty(mother sister) as a Gift is it tax free?
I received a gift of Rs.2500000 from my mother's brother. Since it is a gift from relative it is not taxable. but how do I disclose it in my return of income. kindly advise.
Hi SR, There is field “Exempt income”. Please declare the same in the ITR
hii..
One of my client is going to receive a house property from his two brothers which is currently registered on all the three brothers name..Is this transaction taxable for my client..
Any gift received from brother/s is not taxable as they fall under “relative”
My mother like to Gift / transfer her house in my son's name. Does it atract to any Gift tax / Income tax to my mother or my son?
It is tax free as your son falls under “relative” category.
Thanks for running this excellent blog. May I put up a question ! I consulted my tax consultant but unfortunately his reply was not convincing. I shall be obliged for a response on this query. My wife and me – both are 'professionals' and have separate incomes and regular 'individual' tax payers. Can my wife 'gift' me eg. 1 lac Rs. by cheque out of her 'tax-paid' / 'white' income. I sincerely believe that this gift will not 'invite' tax for her as well as me since she is a relative under exempted category. Secondly – for instance if I make a fixed deposit of the said gift – the interest on this fd would be my income which will be my income form other sources and cannot be 'clubbed' with my wife's income. Thanks in anticipation.
Vishwanath, I don’t think there is any confusion. Your wife can give gift to you and this is not taxable as you fall under “relative” category. Any income earned on that, you can pay tax. The confusion would arise in case one of them is non-earning member and this is done just to avoid tax. Your case is clear.
CAN I GIFT TO MY DAUGHTER IN LAW . WHAT ABOUT THE INCOME FROM THAT GIFTED AMOUNT.SHE IS A DOCTOR.
Hi Ajmer, you can gift do your daughter in law. Income from such would be clubbed with your daughter in law income and she need to pay necessry tax
Hi Suresh, thanks for posting so many informative articles and clarifying so many grey areas for people like me…my question is in regards to clubbing of income (sec 64).
If I, my father , my mother transfer an amount >50,000 INR to my wife and she invests from that amount the income earned is taxable to me / my father/ my mother respectively , however if I transfer the same amount >50,000 INR in an year to my brother in law and he then transfers it back to my wife … then the implications per me would be no gift taxable for my brother in law and also no gift taxable to my wife (both being received from relatives) and also the provision for clubbing is not applicable (sec 64 i mean). is that right ??
regards
Aarun 85509 19009
Aarun, Brother in law is not termed as relative. Your bro-in-law need to pay gift tax.
Can my aunt gift me cash?
if yes is it taxable?
Hi Bhushant, Is your aunt falling under relative category given in the article. If not, you need to pay income tax.
Hi Mr. Suresh,
If a nonrelative gives 50000 per financial year credited to bank account for each member of my family (5 x 50000 = 25000), will it be treated as separate entities for each individuial (in which case no tax has to be paid) or will it be clubbed together for paying income tax for the single family.
Further more, will it come under scrutiny if the person keeps on gifting each financial year.
Thanks
Skariah, These are 5 different transactions, hence I don’t think gift tax apply. You can check with local tax consultant in case of getting 100% confirmation.
Hi Suresh,
My father paid 5 lac from his account in my current outstanding home loan account. Do i need to pay any tax or do i have any kind of tax liability in future due to this 5 lac amount?
Thanks,
Rohit
Hi Rohit, If this is treated as loan, OK. Even if this is treated as gift, even this is ok as you would fall under relative terminology as per IT. No liability.
Can i give loan to my wife say rs.10 lakh. then income from that amount (interest) will be clubbed to my income or not. pl . reply. Thanks.
Ajmer, Your comment was not clear. If my understanding is correct, you are indicating that you want to give loan to your wife who can further give loan to somebody else and any interest income earned by your wife, whether it would be clubbed in your income. The answer is yes. If my interpreation of question is wrong, please provide clarity about this
Hi There…
I want to gift a house to my parents which is at my name as on date. Do they need to pay documentation charges for the name transfer? Are there any additional tax on such transactions?
Hi Renish, There are no additional tax on such gifts. However documentation charges would be as per property registration rules.
Thanks Suresh. …
Hello Mr. Suresh,
Good evening. I have three queries that have not been able to get an answer to so far.
1) Situation 1:
I am a salaried person and in March 2014, I had inherited an amount from my aunt who passed away, as per her will.
From your blog, I understand I will not be liable to pay gift tax.
However, I am in a dilemma as to how to reflect this amount that I received in the Income Tax returns of FY 13-14. Or is it that we do not need to reflect it at all? Also, is there any tax that is needed to be paid as a result of this inheritance and does this fall under Capital Gains Tax? Is there a time frame within which I must invest that amout?
2) Situation 2:
Can a salaried person claim depreciation on his / her own vehicle that is self use, self paid for? If yes, at what rate and how do we represent it in the IT returns and if no, why?
3) Situation 3:
Based on the question 1, I woud like to know what would be the implications of transferring the inheritance amount I received to my wife? My wife is currently working. What, if any, will be the subsequent taxation of income gained from that amount?
Thanks.
Regards,
Kiran
My Mother a pensioner sold away her share of Family Property want to gift Rs.20.00 Lakhs to her Daughter (my Sister). My sister is a house wife and my brother-in -law is a govt. employee. Now being my sister falls in RELATIVE category the amount of gift is not taxable but whose should be charged on the intrest accruded on the gift amount in the name of my sister? Please answer. Thank you.
Murthy, Your question is not clear. 1) Your sister would fall under relative category, hence no Gift tax payable by your sister 2) Since this amount is now pertains to your sister, hence returns coming from such FD would be taxable in your Sister hands. This second rule applies for all except for gifts given to Spouse
i wants to gift to my wife of rs . 15 lacs. and she invest in FD in bank. i know that the interest is to be clubbed in my income. But i want to know what will the liability of interst in the next financial year. it will be her income or clubbed to my income.
Ajmer, There are two components. One is gift tax and next is income tax. When you give gift of Rs 15 L to your wife, it is exempted from gift tax as your wife would fall under “relative” category in IT terminology. However since she does not have any income, any returns from such FD’s would be clubbed with your income and income tax has to be paid.
I WANTS TO GIFT 10 LAKHS TO MY WIFE. SHE IS A HOUSE WIFE AND EARNING RS.60000/= PER YEAR BY STICHING & SEWING CLOTHES AT HOME . I WANTS TO KNOWS IF SHE INVESTS GIFTED MONEY IN BANK FD. THEN WHAT WILL BE THE TAX LIABILITY OF INTEREST RECD. ON FD.
Hi Ajmer, If you gift some amount to your spouse, any income generated out of it would be clubbed with your income and income tax needs to be paid.
Hi Suresh
i want to gift money Rs.45000 to my wife's A/c, i have some queries…
– Can i pay by cheque or cash ?
– On the gift amount my wife have to pay tax or not. ?
– Should i mention the amount of the gift in my tax return paper or not..??
if yes where in which catagory?
Regards
Sumit
Hi Sumit, any gift given to your wife (IT calls as “relative” where spouse is also included) is exempted from gift tax. See point no.1 in exclusions given in this article.
My son's marriage fixed during end july 2014. His future in laws plans to gift Rs 5 lacs to marriage expenses . Is this amount taxable?
Can A daughter in law gift a sum of Rs 20 Lac or more to Mother in Law.. (both NRI)
kindly Reply.
thanks.
very good and informative article. please do write about the gift to HUF and income tax rule for huf gifts i.e. can huf receive gifts from relatives of members.
Sure Vimal
can. a father gift money to his daughter in law,son and sons huf.can a mother gift money to daughter in law,son and sons huf
Gaurav, Son, Daughter and Daughter in-law falls under “Relative” definition of Gift tax rules, hence any gift given to them is exempted under Gift tax.
My father wants to give me a gift of Rs.5.00 Lacs or more through FD. Does it atracts gift tax.
Bhavesh, Any gift given by “Relative” (as per definition of Gift tax rules) are exempted from tax. Gift from your father falls under “Relative” definition and hence exempted from gift tax.
Well explained through FAQ. Thanks
Dear Suresh,
Thanks a lot for the useful article. You have explained all possible scenarios in a simple manner by giving examples. I would like to request you to provide also some tips to minimize the taxes with respect to gift tax in all possible scenarios.
Thanks
Ravi N
Sure Ravi. I would do that in coming days.
Hi Suresh
A very well written article. It answers all the possible questions which arise in a tax payers mind.