Gift Tax In India
Gift tax is history, or rather, was history.
Financial act 1998 had deleted gift tax act w.e.f.1.10.98. consequently, all gifts made on or after 1.10.98 are free from gift tax. Neither the donor nor the donee would have to pay any tax. Financial act 2004 has revived it partially, but it is in the form of donee-based income tax instead gift.
The clubbing provisions in the Income Tax Act 1961 and Wealth Tax Act, 1957 are not deleted. Therefore, income and wealth from assets transferred directly or indirectly without adequate consideration to minor children, the spouse (otherwise than in connection with an agreement to live apart) or daughter-in-law will continue to be deemed income and wealth of the transferor. Same is the case when assets are held by a person or an Association Of Persons for benefit of assesses, the spouse, daughter-in-law and minor children.
Gift tax was not applicable to gifts of movable property situated in Jammu and Kashmir. Now, that the Gift Tax Act, 1958 is abolished, the clubbing provisions would be applicable to gifts of movable properties in J&K also.
The Gift tax in India is regulated by Gift Tax Act that was constituted on April 1, 1958. It came into effect in nearly all parts of the country except Jammu and Kashmir. As per this Act 1958, all gifts exceeding Rs. 25,000, in the form of cash, draft, check or others, received from one who does not have blood relations with the recipient, were taxable.
However from October1, 2009, individuals receiving shares or jewellery, valuable artifacts, valuable drawings, paintings or sculptures or even property valued over Rs 50,000 as gifts from non-relatives, shall have to start paying tax.
Gifts are Taxable Only in the Case of Individuals and HUFs
U/s 56(2) (vi) certain gifts are taxable according to income tax as "income from other sources". However, this provision applies only for individuals & Hindu Undivided Families (HUFs). Thus, if gift is received by any Trust or A.O.P., then it shall not be liable to income tax as "income from other sources".
Minors
The entire income that arises or accrues to a minor is to be included in the income of that parent whose total income (excluding the income includible) is higher. When the marriage of the parent does not subsist, the income of the minor will be included in the income of that parent who maintains the minor child. Income arising in the succeeding year shall not be included in the other spouse unless the assessing officer is satisfied that it is necessary to do so.
Where the income of the individual includes the income of his minor children, an exemption up to Rs. 1,500 in respect of each minor child can be claimed by the individual u/s 10(32).
Where a minor is admitted to the benefits of the partnership firm, the value of the interest of such minor in the firm shall be included in the net income of the parent of the minor.
All the income of physically or mentally handicapped minor child will be directly assessed in the hands of the child. Similarly, a minor earning income by way of manual work or an activity involving application of his skill, talent or specialized knowledge and experience, is directly assessed in the hands of the child. Unfortunately, the income arising from his investments will suffer clubbing.
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