Tax on Gifts in India

What is Gift Tax in India?

Tax on gifts in India was initially introduced in 1958 under the Gift Tax Act. However, this act was abolished in 1998. But gifts are still taxable. The rules now fall under the purview of the Income Tax Act of 1961, specifically under Section 56(2)(x).

What Is a Gift as per the Income Tax Act

The Income Tax Act gives a specific definition of ‘Gift,’ according to which, if you receive any money or moveable/immovable property from another person without making any payment, it will be termed as a gift.

Thus, if you receive any of the following as a gift, the related income tax provisions will be applicable:

• Money in the form of cash, cheque, draft, bank transfer, etc.
• Movable property like shares, bonds, jewelry, sculptures, paintings, etc. If you have received a movable property at a price lower than its fair market value, it will also be considered as a gift.
• Immovable property such as building, land, residential or commercial property. Similar, to the above point, if you receive the immovable property at a price lower than its stamp duty value, income tax act will treat it as a gift.

Gifts Exempted From Tax

Certain gifts you receive can indeed attract tax on gifts in India. But don’t worry! There are some important exceptions to this rule. Let’s break down these exceptions so you can understand when you might not have to pay tax on a gift.

How to Calculate the Taxable Value of a Gift

To figure out how much tax on gifts in India you owe, the Income Tax Act has guidelines for calculating the taxable value of gifts. Here’s a handy table that explains how to determine the gift tax rate in India for different types of monetary and non-monetary gifts: