Tax on gift made to a person outside India from 5th July 2019

By | July 7, 2019
(Last Updated On: July 7, 2019)

Deemed accrual of gift made to a person outside India

Section 9 of the Act relates to Income deemed to accrue or arise in India. Under the Act, non –residents are taxable in India in respect of income that accrues or arises in India or is received in India or is deemed to accrue or arise in India or is deemed to be received in India. Under the existing provisions of the Act, a gift of money or property is taxed in the hands of donee, except for certain exemptions provided in clause (x) of sub-section (2) of section 56. It has been reported that gifts are made by persons being residents in India to persons outside India and are claimed to be non-taxable in India as the income does not accrue or arise in India. To ensure that such gifts made by residents to persons outside India are subject to tax, it is proposed to provide that income of the nature referred to in sub-clause (xviia) of clause (24) of section 2, arising from any sum of money paid, or any property situate in India transferred, on or after 5th July, 2019 by a person resident in India to a person outside India shall be deemed to accrue or arise in India. However, the existing provision for exempting gifts as provided in proviso to clause (x) of sub-section (2) of section 56 will continue to apply for such gifts deemed to accrue or arise in India. In a treaty situation, the relevant article of applicable DTAA shall continue to apply for such gifts as well

This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-21 and subsequent assessment years.

[Clause 4]

Amendment of section 9.

Clause 4 of Finance Bill 2019

4. In section 9 of the Income-tax Act, in sub-section (1), after clause (vii), the following clause shall be inserted with effect from the 1st day of April, 2020, namely:––

“(viii) income of the nature referred to in sub-clause (xviia) of clause (24) of section 2, arising from any sum of money paid, or any property situate in India transferred, on or after the 5th day of July, 2019 by a person resident in India to a person outside India.”.

Section 2(24)(xviia) of Income Tax :

(24) “income” includes:-

—-

(xviia)any sum of money or value of property referred to in clause (x) of sub-section (2) of section 56;

 

Section 56(2)(x) of Income Tax :-

where any person receives, in any previous year, from any person or persons on or after the 1st day of April, 2017,—
(a)any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum;
(b)any immovable property,—
(A)without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;
(B)for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration:
Following item (B) shall be substituted for the existing item (B) of sub-clause (b) of clause (x) of sub-section (2) of section 56 by the Finance Act, 2018, w.e.f. 1-4-2019 :
(B)for a consideration, the stamp duty value of such property as exceeds such consideration, if the amount of such excess is more than the higher of the following amounts, namely:—
(i)the amount of fifty thousand rupees; and
(ii)the amount equal to five per cent of the consideration:
Provided that where the date of agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of agreement may be taken for the purposes of this sub-clause :
Provided further that the provisions of the first proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by way of an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank account, on or before the date of agreement for transfer of such immovable property:
Provided also that where the stamp duty value of immovable property is disputed by the assessee on grounds mentioned in sub-section (2) of section 50C, the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of section 50C and sub-section (15) of section 155 shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of this sub-clause as they apply for valuation of capital asset under those sections;
(c)any property, other than immovable property,—
(A)without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property;
(B)for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration :
Provided that this clause shall not apply to any sum of money or any property received—
(I)from any relative; or
(II)on the occasion of the marriage of the individual; or
(III)under a will or by way of inheritance; or
(IV)in contemplation of death of the payer or donor, as the case may be; or
(V)from any local authority as defined in the Explanation to clause (20) of section 10; or
(VI)from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or
(VII)from or by any trust or institution registered under section 12A or section 12AA; or
(VIII)by any fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10; or
(IX)by way of transaction not regarded as transfer under clause (i) or 72a[clause (iv) or clause (v) orclause (vi) or clause (via) or clause (viaa) or clause (vib) or clause (vic) or clause (vica) or clause (vicb) or clause (vid) or clause (vii) of section 47; or
(X)from an individual by a trust created or established solely for the benefit of relative of the individual.
Explanation.—For the purposes of this clause, the expressions “assessable”, “fair market value”, “jewellery”, “property”, “relative” and “stamp duty value” shall have the same meanings as respectively assigned to them in the Explanation to clause (vii).]

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