Question When tax on gifts has to be paid and shown in income tax return?
As per Section 56 of Income Tax Act 1961, Gift exceeding Rs. 50,000/- is taxable in the hands of Donee and is to be indicated under the head Income from Other Sources in ITRs. But if gifts received from Donors does not exceeds Rs. 50,000/- then whole of the sum received is not to be provided for tax under any head of Income. Also, Second Proviso to Section 56(2)(vii) of Income Tax Act, 1961 provides for certain conditions where any sum received as gift is not to be provided for tax under Income Tax Act, 1961 whether that exceeds Rs. 50,000/- or not.
Section 2(24)(xv) of Income Tax Act, 1961, defines Income as:
(xv) any sum of money or value of property referred to in clause (vii) [or clause (viia)] of sub-section (2) of section 56;
Section 56(2)(vii) of Income Tax Act, 1961, provides as follows:
In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head “Income from other sources”, namely :-
(vii) where an individual or HUF receives, in any previous year, from any person or persons on or after the 1st day of October, 2009,-
(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;
Provided further that this clause shall not apply to any sum of money or any property received-
(a) from any relative; or
(b) on the occasion of marriage of the individual; or
(c) under a will or by way of inheritance; or
(d) in contemplation of death of the payer or donor, as the case may be; or
(e) from any local authority as defined in the Explanation to clause (20) of section 10; or
(f) from ay 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 (g) from any trust or institution registered under section 12AA.
Now from the above provisions, it is clear that any sum received from relatives or on occasion of marriage, etc. is not to be included in Income from other sources and hence is not to be treated as Income, so there is no requirement to show those gifts in ITRs as it does not fall under the definition of Income chargeable to tax.