Tax on Gift of Immovable Properties- Applicability & Exemptions

Tax on Gift of Immovable Properties- Applicability & Exemptions 

1. When a Gift og immovable property is chargeable to tax?
2. What is value of taxable amount in case of Gift of immovable property?
3. In what cases, Gift of immovable property without consideration or at less than its stamp duty value is not chargeable to tax?
4. When a Gift of immovable property at less than its stamp duty value is chargeable to tax?
5. What is value of taxable amount in case of Gift of immovable property at less than its stamp duty value?
6. Are gifts of immovable assets received by a non-resident person chargeable to tax?
7. Are gifts of immovable assets received from a Non-Resident or from out of India chargeable to tax?
     

1. When a Gift of immovable property is chargeable to tax?

 A Gift of immovable property is chargeable to tax if following conditions are satisfied: - 

1. The immovable property should be a prescribed asset. The list of Gifted Prescribed immovable property for tax chargeability consists of land or building or both.
2. The immovable property should fall in definition of capital asset as per section 2(14) of income tax act like it should not be a agricultural land.
3. The prescribed movable asset should be received by an Individual or HUF.
4. The prescribed movable asset should be received without any consideration.
5. The aggregate stamp duty value of those gifted prescribed immovable properties received by an Individual or HUF in a financial year exceeds Rs. 50000.
6. Gift is not received from any exempted list of person or occasion.

2. What is value of taxable amount in case of Gift of immovable property?

 In case of gift of prescribed immovable property, if the aggregate stamp duty value in the hands of receiver exceeds Rs. 50000, the total stamp duty value of all the gifted prescribed immovable properties are chargeable to tax.

 Here the limit of 50000 is just to determine chargeability, it’s not a deduction, if the stamp duty value of gift exceeds Rs. 50000, then the entire stamp duty value of gift would be chargeable.

3. In what cases, Gift of immovable property without consideration or at less than its stamp duty value is not chargeable to tax?

In the following situations, even any prescribed immovable property received by Individual or HUF without consideration or at less than its stamp duty value is not chargeable to tax: - 

1. Gift of any immovable property received by an Individual from the person covered in the definition of “Relative”.
2. Gift of any immovable property received by HUF from its members.
3. Gift of any immovable property received by an Individual from any person on occasion of his /her marriage.
4. Gift of any immovable property received by an Individual or HUF by way of inheritance or by will.
5. Gift of any immovable property received from any fund, foundation, hospital, educational institution, university, trust / Institution, registered under section 10(23C),
6. Gift of any immovable property received from a local authority.
7. Gift of any immovable property received in contemplation of death of payer or donor.
8. Gift of any immovable property received from a trust or institution registered u/s 12AA.

4. When a Gift of immovable property at less than its stamp duty value is chargeable to tax?

A Gift of immovable property at less than its stamp duty value is chargeable to tax if following conditions are satisfied: - 

1. The immovable property should be a prescribed asset. The list of Gifted Prescribed immovable property for tax chargeability consists of land or building or both.
2. The immovable property should fall in definition of capital asset as per section 2(14) of income tax act like it should not be an agricultural land.
3. The prescribed movable asset should be received by an Individual or HUF.
4. The prescribed movable asset should be received at a consideration less than its stamp duty value.
5. The difference between the aggregate stamp duty value and the actual consideration charged is more than higher of Rs. 50000 or 5% of actual consideration charged.
6. Gift is not received from any exempted list of person or occasion.

5.  What is value of taxable amount in case of Gift of immovable property at less than its stamp duty value?

 In case of gift of prescribed immovable property at less than its stamp duty value, if the difference between the aggregate stamp duty value and the actual consideration charged is more than higher of Rs. 50000 or 5% of actual consideration charged. Then the total difference between stamp duty value & actual consideration would be chargeable to tax.

Here the limit of 50000 is just to determine chargeability, it’s not a deduction, if the stamp duty value of gifted immovable property is Rs. 25 lacs and the actual consideration charged is Rs. 20 lacs and the calculation of chargeable amount would be done as follows: -

Difference between stamp duty value & actual consideration = (25-20 )=  5 lacs

The 5% of actual consideration = 20*5% = 1 lac

The higher of 50000 or 1 lac = 1 lac

Since the difference between stamp duty value & actual consideration is more than higher of 50000 or 1 lac, the entire difference of 5 lac is chargeable to tax as other income under the head income from other sources.

6. Are gifts of immovable assets received by a non-resident person chargeable to tax?

Yes, w.e.f. 05^th July 2019, any gift of immovable assets by an any person Resident in India to a Non-Resident person or a foreign company is chargeable as gift of immovable assets as income from other sources. That will be treated as income deemed to accrue or arise in India.

7. Are gifts of immovable assets received from a Non-Resident or from out of India chargeable to tax?

Yes, any gift of immovable assets received by a Resident Individual or HUF in India from any person (whether resident or non-resident) other than exempted list, will be chargeable to tax provided his aggregate value of gifts in a financial year from all eligible persons exceeds Rs. 50000.