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Gift Tax Act - Rules In India

Gift Tax in India is regulated by the Gift Tax Act which was constituted on April 1, 1958. It came into effect in all parts of the country except Jammu and Kashmir. As per the Gift Act 1958, all gifts in excess of 50,000/- in the form of cash, draft, check or others, received from one who doesn't have blood relations with the recipient, were taxable.

The laws state that gifts, whether in cash or kind, which exceed Rs. 50,000 will be taxed as 'income from other sources' u/s 56 (2) of the Income Tax Act in the hands of the recipient. This provision also applies to movable or immovable property that has been purchased for inadequate payment.

Though Gift Act 1958 was not initially applicable to Jammu & Kashmir, however the current clubbing provisions in the Income Tax Act 1961 would be applicable to gifts of movable properties in the said state as well.

Important Definitions of Terms Used in Gift-Tax Act

View / Download-Word Format
Simple Gift Deed
Deed of Gift of Immovable Property

Exceptions for Gift Taxes

Gifts that are not taxable at all are those that are received from relatives. Relatives are defined by the following relationships of the individual:

  1. Parents
  2. Parents siblings and their spouse
  3. Siblings
  4. Spouse of siblings
  5. Daughter and son
  6. Spouse of daughter and son
  7. Spouse
  8. Spouse's parents
  9. Spouse's siblings and their respective spouse.

Even NRI are covered as long as they fall in the category of relatives. Therefore an individual Indian resident can receive a tax free gift from an NRI as long as he/she is that individuals relative. Any amount can be received as a gift from a relative. Also the purpose for which the gift is received from a relative is inconsequential as it is completely tax free. Thus a gift received can be used for any purpose ranging from purchasing shares to buying property to even simply keeping it with the bank.

Secondly, the gifts given in any of the following occasions are tax free :-

  1. On your marriage
  2. Inheritance via will
  3. Gift from local authority
  4. Gift from registered public charitable trust/institution
  5. Gifts in contemplation of death.

Gift Tax on Movable/ Immovable properties

There is a valuation aspect involved in gifting of immovable properties

In case of other properties:

Document of Gift transactions, Registered Deed or plain paper

A gift deed is a deed, that is executed and delivered in which the donor transfers title to the receiver without any payment or considerations. It a document which transfer the legal title of the property to the donor, where the consideration is not monetary but is made in return for love and affection. There is indistinctness with respect to compliance of the gift deed at times, Whether a gift deed is required to be made in every circumstance

When it is required to be stamped OR get registered?

Gift made by way of cash or cheque does not mandatory requires to be executed through a gift deed. Writing a plain typed note on a paper will generally suffice. It is not required to be stamped and registration is also not needed. You may simply mention the names of persons, their relation and that the gift is being given out of love and affection. Gift made by way of movable property is required to be made in stamp paper and stamped by the notary or court, and registration of gift deed is not required in this case. For the purpose of making a gift of immovable property, the transfer must be effected by a registered instrument signed by or on behalf of the donor. Gift of immovable property which is not registered is not valid as per law and cannot pass any title to the receiver.