Tax on Monetary Gifts – Applicability & Exemptions

Tax on Monetary Gifts – Applicability & Exemptions 

1. Which "Monetary Gifts" are chargeable to tax?
2. Who can make monetary gifts which are chargeable to tax?
3. Are monetary gifts chargeable to tax in excess of Rs.50,000?  
4. Is Monetary gifts received by a non-resident person chargeable to tax?
5. Is Monetary gifts received from a Non-Resident or from out of India chargeable to tax?
6. In what cases, monetary gifts are not chargeable to tax? 
     

1. Which “Monetary Gifts” are chargeable to tax?

 Following are the conditions to be qualify as a monetary gift: - 

1. It should be received by an individual or HUF.
2. It should be received in cash, cheque, draft or any other banking transfer mode.
3. Such money should be received without consideration.
4. The aggregate sum of such monies during a financial year exceeds Rs. 50000.

If above condition satisfies, the entire amount received as gift is chargeable to income tax in the head “income from other sources.”

2. Who can make monetary gifts which are chargeable to tax?

Gifts from following person are chargeable as “Monetary Gift” to tax: -

1. Gift of money by any person located in India or abroad (whether Resident or Non-Resident) to the Indian Resident Individual or HUF is chargeable as “Monetary Gifts”.
2. Gift of money by any Indian resident person to any non-resident or a foreign company is chargeable as “Monetary Gifts.”

Above Gifts are chargeable in hands of recipient if the total amount of gifted money in aggregate during a financial year exceeds Rs. 50000.

There is a list of few persons / relations/ occasions by which or on which any monetary gift is exempt to tax. The list  is covered in a separate question.

3. Are monetary gifts chargeable to tax in excess of Rs.50,000?  

Monetary gifts received by an Individual or HUF is exempt only if the aggregate amount of gifted money in a financial year does not exceed Rs. 50000.

But if it exceeds Rs. 50000, there is no exemption and the full amount is chargeable to tax.

For example, if Ram receive Rs. 90000 from his friend in a year, then the full Rs. 90000 will be chargeable as other income of Ram.

4. Is Monetary gifts received by a non-resident person chargeable to tax?

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

5. Is Monetary gifts received from a Non-Resident or from out of India chargeable to tax?

Yes, any sum of money 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.

6. In what cases, monetary gifts are not chargeable to tax?

In the following situations, any sum of gifted money received by Individual or HUF are not chargeable to tax: -

1. Any sum of money received by an Individual from the person covered in the definition of “Relative”.
2. Any sum of money received by HUF from its members.
3. Any monetary gifts received by an Individual from any person on occasion of his /her marriage.
4. Any monetary gifts received by an Individual or HUF by way of inheritance or by will.
5. Any share of money received due to business re-organization of a co-operative bank.
6. Any money received from a trust / Institution, registered under section 12AA.
7. Any money received from a local authority.
8. Any money received in contemplation of death of payer or donor.
9. Any share of money received due to demerger or amalgamation of a Company