Taxation

Wealth Tax and Gift Tax

 Wealth Tax
 Objective: To penalize unproductive use of assets
 PRIOR TO 2016-17: Wealth above Rs. 30 lakh is subject to WT
 Tax rate 1% on the value above Rs. 30 lakh
 Financial assets are not subject to wealth tax
 Jewellery, bullion, Gold/ silver utensils, House, luxury cars, watches, yachts and
aircraft, and cash over Rs. 50,000.
 Real Estate:
 Second house is subject to WT
 Exempted if rented for at least 300 days in a year
 Commercial complex is not subject to WT
 Penalty: 1% interest for each month of delay. Penalty for evasion 100-500% of the
amount due.
 WEALTH TAX NOW STANDS ABOLISHED FROM THE FINANCIAL YEAR 2016-
17. INSTEAD ADDITIONAL SURCHARGE OF 2% FOR INCOME ABOVE ONE
CRORE.
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 Gift Tax
 No gift tax since 1998, but brought in again in 2004 by
including provisions in the IT Act and tightened in 2009.
 Receiver has to pay tax
 On any gift worth more than Rs. 50,000
 Gifts received by children clubbed with parents’ income
 Real estate transaction below govt. fixed price
 Exempt:
 Gifts from relatives: spouse, siblings, uncles, lineal
ascendants or descendants (or spouse of these relatives)
 Gifts received on the occasion of marriage
 Gifts from parents, grandparents, gifts through will and
inheritance
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  As per the provisions of section 56(2) of the Income Tax
Act, 1961, any gifts (in cash or kind) received by an
individual or HUF (Hindu Undivided Family) in excess of
Rs. 50,000/- in a year would be taxable.


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  Who is liable to pay gift Tax?
 Person receiving gifts will be liable to pay gift tax. Such
income would be taxable in the year in which received and
taxable under the head “Income from other sources”.

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 What does Gift means in Income Tax Act?
 “Gift” means the transfer by one person to another of
any existing movable or immovable property made
voluntarily and without consideration in money or money’s
worth.
 Thus, income tax authority considers:
 Monetary gifts given in cash/cheque/demand draft,
 Moveable property such as jewellery, gold bars, paintings,
drawings or sculptures,
 Immovable property such as land or building or both, as
gifts.

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  Are gifts of immovable property received by an
individual or HUF charged to tax?
 Gift of immovable property received by an individual or
HUF will be charged to tax, if:
 Immovable property (land or building or both) is received by
an individual/HUF,
 received without consideration (i.e., received as a gift)
 Stamp duty value of such immovable property
received exceeds Rs. 50,000

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 Exemptions from levy of Income
Tax on Gifts
 Received from relatives** (See below).
 Received by a HUF from its members.
 Received on the occasion of the marriage
 Received under will/ by way of inheritance.
 Received in contemplation of death of the payer or donor.
 Received from a local authority
 Received from any fund/foundation/university/other educational
institution/hospital or other medical institution, any trust or institution
referred to in Section 10(23C).
 Money received from a trust or institution registered under section 12AA.


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 Relatives Meaning for Gift taxability
 Relatives for this purpose means:
 (a) Spouse of the individual;
 (b) Siblings (Brother or sister) and their spouses of the individual;
 (c) Siblings of the spouse of the individual;
 (d) Siblings of the parents of the individual;
 (e) Any lineal ascendant or descendant of the individual;
 (f) Any lineal ascendant or descendant of the spouse of the
individual;


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 Key Points / Highlights – Income
Tax on Gift Received
 any gift (cash or kind) in excess of Rs.50000, received without consideration by
an individual or HUF from any person* is chargeable to tax,
 Gift include any gift, “cash or kind” or “movable or immovable property,
 Chargeable to tax under head “income from other sources”,
 Chargeable to tax in the hand of recipient
 Gift of immovable property received without consideration by an individual or
HUF will be charged to tax, if, Stamp duty value of such immovable
property exceeds Rs. 50,000
 Gift received on the occasion of the marriage is exempt from tax
 Gift received from relatives exempt from tax

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