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Tax4india ›› Gift Tax India›› Gift As Income
Gifts As Income In Gift Tax In India
As predicted, there was a large seepage through the 'gift' route. Finance Act 2004 has revived gift tax partially but in the form of income tax.
The Bill proposed to introduce a new section 10(39) for imposing limits on the aggregate of such income received or credited during the previous year does not exceed.
- A sum of Rs. 25,000.
- A further sum not exceeding one hundred thousand rupees received by an individual on the occasion of marriage.
This has been replaced by Finance Act 2004 by inserting a new clause 'v' in section 56 bringing the following item under the head, Income From Other Sources-- where any sum of money exceeding Rs. 25,000 is received without consideration by an individual or an Hindu Undivided Family from any person on or after 1st day of September, the whole of such sum.
Provided that this clause shall not apply to any sum of money received
- From an relative, or
- On the occasion of the marriage of the individual, or
- Under a will or by way of inheritance, or
- In contemplation of death of the payer.
Explanation:-
For the purpose of this clause relative means
- Spouse of the individual.
- Brother or sister of the individual.
- Brother or sister of spouse of the individual.
- Brother or sister of either parents of the individual.
- Any linear ascendant or descendant of the individual.
- Any linear ascendant or descendant of the spouse of the individual.
- Spouse of the persons referred in clauses (ii) to (iv).
Obviously, his new gift tax become donee-based.
This means---
- The phrase 'on the aggregate of such income' has been replaced with 'any sum of money exceeding Rs. 25,000 is received .. from any person' (note that the world is singular not plural). Consequently, the individual or HUF gets the right of claiming exemption up to Rs. 25,000 on each and every gift received form different persons.
- Any sum of money received as a wedding gift would be totally free of tax!
- A strict reading of the legislation suggests that the new provisions are applicable to cash gift only and not other assets such as immovable property or jewellery, etc. In other words, such other assets gifted even by a stranger will be free of tax.
- The phrase 'received without consideration' is too much generic in nature and therefore, it is litigaions-oriented. Whether sum received by way of interest-free loan will fall into this category or not is a question mark. More glaring examples are aids given by charitable to students for educatio or to pateints for medical treatment, money paid by government to flood or earthquack victime, etc.
- Defination of relative is a joke. Take the instance os Miss X whose mother's brother is Mr. Y. Yes, Y is a relative of X(Mother's brother) but X is not a relative of Y (sister's daughter). I thought that is X is a relative of Y. the Y is also a relative of X.
Strangly, and for no particular reason, this defination differs from the defination as contained in SCRA as well as Companies Act.
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