GIFT TAX - Land & Property : A - Z GUIDE
If the value of the gifts received by you during the financial year is above Rs. 50,000, you will have to pay tax on it. However, there are some exceptions to this gift tax.
According to the Indian Income Tax Act (as well as the New Income Tax Code, which is likely to come into effect from, 2012 , April), if you receive a gift whose value exceeds 50,000, it will be clubbed with your income and you will have to pay tax on it. This rule is also applicable if the combined value of all the gifts received by you during a financial year exceeds the limit.
Land & Property..!
* If a property (Land and House) is bequeathed to you under a Will, given on the occasion of your marriage or gifted by a local institution or authority, you won’t be taxed.
* If you have received real estate (land or property) as a gift, it is advisable to get a gift deed signed by the donor or get the property registered with the registrar. This will help you avoid legal problem in future.
* In the case you are gifting real estate, you can add a condition/clause stating that if the recipient dies within your lifetime and does not have any descendants, the property should return to you.
* Property can't be gifted to a foreign national and you can gift residential or commercial property to an
NRIs (Non Resident Indians).
* You can't give NRIs agricultural/plantation land.
Fair Value Important..!
Here one important notable point,If the total value of your gifts exceeds Rs. 50,000, you have to pay income tax on the entire amount, not simply on the difference amount.
This income tax rule applies even in cases where you have bought a product from someone at a much lower price than its fair value.
For an example if the depreciated value of a car is Rs. 6 lakh (Original bought value two years a ago Rs. 10 lakh), but you buy it for Rs.3 lakh, the balance amount Rs. 3 lakh will be considered as a gift and clubbed with your income. However, if you pay 5.6 lakh, you will not have to pay tax as the value of the gift the balance amount is Rs. 40 lakh) is less than Rs. 50,000.
The fair market value of a gift is the price that it would fetch if it is sold in the open market on that particular date as determined by a registered valuer.
In the case of land and property, the Guideline value stamp will be considered as the market value.
Specified Relatives..!
Gifts given by specified relatives are exempt from income tax, regardless of their value. Such relatives include spouse, siblings, brothers/sisters of spouse/parents, grandparents and grandchildren as well as their spouses.
A gift given in contemplation of death by the donor will also be exempt. If a person knows that he is going to die in a few days and gifts his assets to a person, the recipient is exempt from paying tax.
Marriage engagement & Marriage..!
Sametime, if you receive an expensive gift during an marriage engagement, anniversary or birthday party, it will be taxed. But, If you have received the gift on your marriage, is it exempt from tax.
How income tax calculated?
The Indian Income Tax act, the value of the gift is clubbed with your total income and taxed according to your tax slab (10-30% tax, plus surcharge) on your total income.
In the case you earn an income from the gift, it will be taxable under the heading ‘Income from other sources’.
For instance, if you get rental income from a house that has been gifted to you, this will be taxed. A gift given to your minor child or income from that gift will be clubbed with your income.
Suppose, you have gifted a house or shares or mutual fund units to your minor child (or spouse), it will be tax exempt. However, the rental income or dividend earned will be clubbed with your income and taxed.
But if you give such assets to your parents, who have no source of income, the income earned from it will be considered as their income. This can help you reduce your income tax burten.
Income Tax File Return
Any one need to be careful about assessing the gifts you have received in a year while filing your income tax fle return. If any one fail to do so, not only will he/her have to pay the interest liability on outstanding payments, but could also end up paying a fine that is one to 3 times the amount of tax he/her were supposed to pay.
What can be gifted? - Highlight points
# Real estate (Land and Property - residential and commercial)
# Stocks and Mutual Funds/ bonds of companies.
# Paintings and sculptures.
# Jewellery and Gold and silver bars and coins.
When is it exempt from tax? - Highlight points
# If the total value of the gifts received in a financial year is less than Rs.50,000.
# If you have received the gift on your marriage.
# If the asset has been gifted by specified relatives (Like Spouse/Siblings/Brothers/Sisters of Spouse/Parents), regardless of its value.
# If the asset has been bequeathed to you through a Will.
Also Read
Home Loan Tax benefits : The Terms and conditions..!
If the value of the gifts received by you during the financial year is above Rs. 50,000, you will have to pay tax on it. However, there are some exceptions to this gift tax.
According to the Indian Income Tax Act (as well as the New Income Tax Code, which is likely to come into effect from, 2012 , April), if you receive a gift whose value exceeds 50,000, it will be clubbed with your income and you will have to pay tax on it. This rule is also applicable if the combined value of all the gifts received by you during a financial year exceeds the limit.
Land & Property..!
* If a property (Land and House) is bequeathed to you under a Will, given on the occasion of your marriage or gifted by a local institution or authority, you won’t be taxed.
* If you have received real estate (land or property) as a gift, it is advisable to get a gift deed signed by the donor or get the property registered with the registrar. This will help you avoid legal problem in future.
* In the case you are gifting real estate, you can add a condition/clause stating that if the recipient dies within your lifetime and does not have any descendants, the property should return to you.
* Property can't be gifted to a foreign national and you can gift residential or commercial property to an
NRIs (Non Resident Indians).
* You can't give NRIs agricultural/plantation land.
Fair Value Important..!
Here one important notable point,If the total value of your gifts exceeds Rs. 50,000, you have to pay income tax on the entire amount, not simply on the difference amount.
This income tax rule applies even in cases where you have bought a product from someone at a much lower price than its fair value.
For an example if the depreciated value of a car is Rs. 6 lakh (Original bought value two years a ago Rs. 10 lakh), but you buy it for Rs.3 lakh, the balance amount Rs. 3 lakh will be considered as a gift and clubbed with your income. However, if you pay 5.6 lakh, you will not have to pay tax as the value of the gift the balance amount is Rs. 40 lakh) is less than Rs. 50,000.
The fair market value of a gift is the price that it would fetch if it is sold in the open market on that particular date as determined by a registered valuer.
In the case of land and property, the Guideline value stamp will be considered as the market value.
Specified Relatives..!
Gifts given by specified relatives are exempt from income tax, regardless of their value. Such relatives include spouse, siblings, brothers/sisters of spouse/parents, grandparents and grandchildren as well as their spouses.
A gift given in contemplation of death by the donor will also be exempt. If a person knows that he is going to die in a few days and gifts his assets to a person, the recipient is exempt from paying tax.
Marriage engagement & Marriage..!
Sametime, if you receive an expensive gift during an marriage engagement, anniversary or birthday party, it will be taxed. But, If you have received the gift on your marriage, is it exempt from tax.
How income tax calculated?
The Indian Income Tax act, the value of the gift is clubbed with your total income and taxed according to your tax slab (10-30% tax, plus surcharge) on your total income.
In the case you earn an income from the gift, it will be taxable under the heading ‘Income from other sources’.
For instance, if you get rental income from a house that has been gifted to you, this will be taxed. A gift given to your minor child or income from that gift will be clubbed with your income.
Suppose, you have gifted a house or shares or mutual fund units to your minor child (or spouse), it will be tax exempt. However, the rental income or dividend earned will be clubbed with your income and taxed.
But if you give such assets to your parents, who have no source of income, the income earned from it will be considered as their income. This can help you reduce your income tax burten.
Income Tax File Return
Any one need to be careful about assessing the gifts you have received in a year while filing your income tax fle return. If any one fail to do so, not only will he/her have to pay the interest liability on outstanding payments, but could also end up paying a fine that is one to 3 times the amount of tax he/her were supposed to pay.
What can be gifted? - Highlight points
# Real estate (Land and Property - residential and commercial)
# Stocks and Mutual Funds/ bonds of companies.
# Paintings and sculptures.
# Jewellery and Gold and silver bars and coins.
When is it exempt from tax? - Highlight points
# If the total value of the gifts received in a financial year is less than Rs.50,000.
# If you have received the gift on your marriage.
# If the asset has been gifted by specified relatives (Like Spouse/Siblings/Brothers/Sisters of Spouse/Parents), regardless of its value.
# If the asset has been bequeathed to you through a Will.
Also Read
Home Loan Tax benefits : The Terms and conditions..!
Hey nice post dude!!! it is really help ful for the buyers who are looking for Properties in Hyderabad properties in Bangalore etc.
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