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How are gifts of movable property received by an individual or HUF charged to tax?
As per Section 56(2)(x) of the Income Tax Act, 1961): “Any sum of money or property (other than immovable property) received without consideration by an individual or Hindu Undivided Family (HUF) in excess of ₹50,000 in aggregate during a financial year shall be taxable as income from other sources,Read more
As per Section 56(2)(x) of the Income Tax Act, 1961):
“Any sum of money or property (other than immovable property) received without consideration by an individual or Hindu Undivided Family (HUF) in excess of ₹50,000 in aggregate during a financial year shall be taxable as income from other sources, unless it is received from a relative.”
Explanation:
What Are Gifts of Movable Property?
In this context, “movable property” includes assets such as money, shares, jewelry (other than immovable property like land or buildings), and other tangible or intangible items that are not fixed to one location.
Taxability Criteria:
From Relatives:
Gifts received from relatives are exempt from tax, regardless of their value.
From Non-Relatives:
If you receive gifts (whether in the form of money or movable property) from non-relatives and the aggregate value of these gifts during the financial year exceeds ₹50,000, then the entire value of the gift is taxable under the head “Income from Other Sources.”
Threshold Limit:
If the total value of such gifts does not exceed ₹50,000 during the year, they are not taxable.
See lessAre gifts of immovable property received by an individual or HUF charged to tax?
As per Section 56(2)(vii) of the Income Tax Act, 1961): “Where any immovable property is received by an individual or a Hindu Undivided Family (HUF) as a gift without consideration, if the stamp duty value of such property exceeds ₹50,000 and the donor is not a relative as defined under the Act, theRead more
As per Section 56(2)(vii) of the Income Tax Act, 1961):
“Where any immovable property is received by an individual or a Hindu Undivided Family (HUF) as a gift without consideration, if the stamp duty value of such property exceeds ₹50,000 and the donor is not a relative as defined under the Act, then the entire value of such property shall be taxable under the head ‘Income from Other Sources’.”
Summary:
No Tax on Gifts from Relatives:
Immovable property received as a gift from a relative is exempt from tax, regardless of its value.
Tax on Gifts from Non-Relatives:
Immovable property received as a gift from a non-relative is taxable if its stamp duty value exceeds ₹50,000; in such cases, the entire value is treated as income and taxed accordingly.
See lessWould any taxability arise if an immovable property is received for less than its stamp duty value?
Yes, if an immovable property is received for less than its stamp duty value, taxability arises on the basis of the higher stamp duty value as per Section 50C. This means you are required to compute your capital gains—and subsequently pay tax—using the stamp duty value as the full consideration forRead more
Yes, if an immovable property is received for less than its stamp duty value, taxability arises on the basis of the higher stamp duty value as per Section 50C. This means you are required to compute your capital gains—and subsequently pay tax—using the stamp duty value as the full consideration for the property transfer.
As per Section 50C – Valuation of Immovable Property:
See less“Where the consideration for the transfer of an immovable property is less than the value adopted or assessed by the Stamp Valuation Authority, then, for the purposes of computing capital gains, the latter value shall be deemed to be the full value of consideration received or accruing as a result of such transfer.”
Which income is charged to tax under the head “Capital Gains”?
According to Section 48 of the Income Tax Act, 1961, the income chargeable under the head “Capital Gains” is determined as follows: Section 48 – Computation of Capital Gains:“The income chargeable under the head ‘Capital Gains’ shall be the difference between the full value of consideration receivedRead more
According to Section 48 of the Income Tax Act, 1961, the income chargeable under the head “Capital Gains” is determined as follows:
See lessWhat is a capital assets?
As per Section 2(14) of the Income Tax Act, 1961): "Capital asset" means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include—(a) Stock-in-trade, consumable stores, or raw materials held for the purpose of business;(b) Personal effeRead more
As per Section 2(14) of the Income Tax Act, 1961):
See lessWhat is long-term capital gain and short-term capital gain?
Section 48 of the Income Tax Act, 1961 provides the basic formula for computing capital gains: Section 48 – Computation of Capital Gains:“The income chargeable under the head ‘Capital Gains’ shall be the difference between the full value of consideration received or accruing from the transfer of a cRead more
Section 48 of the Income Tax Act, 1961 provides the basic formula for computing capital gains:
Note: Although Section 48 does not explicitly define “short-term” or “long-term” capital gains, the classification depends on the holding period prescribed for various asset types under the Act and subsequent notifications.
See lessHow to compute long-term capital gain?
The computation of Long-Term Capital Gain (LTCG) is specified under Section 48 of the Income Tax Act, 1961. The key factor in determining whether a capital gain is long-term is the holding period of the asset. Section 48 – Computation of Capital Gains:“The income chargeable under the head ‘Capital GRead more
The computation of Long-Term Capital Gain (LTCG) is specified under Section 48 of the Income Tax Act, 1961. The key factor in determining whether a capital gain is long-term is the holding period of the asset.
Explanation in Simple Terms:
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See lessLong-Term Capital Asset (LTCA):
A capital asset held for more than 36 months qualifies as a long-term asset for most assets like land, buildings, or unlisted shares.
For listed securities, equity mutual funds, and debt funds, the holding period is more than 12 months.
Jewelry, bonds, and similar assets generally have a 36-month holding period.
Computation of Long-Term Capital Gain (LTCG):
The capital gain is computed similarly to short-term gains, with the special benefit of indexation for long-term assets. Indexation helps account for inflation, increasing the cost of acquisition and improvement, and thus lowering the capital gain on which tax is computed.
Sale Consideration: This is the price you sold the asset for.
Cost of Acquisition: This is the original price you paid for the asset, including any additional costs incurred like brokerage fees, registration charges, etc.
Cost of Improvement: If you have made any improvements to the asset (like renovation, upgrades, etc.), these costs can also be included.
Expenditure on Transfer: This includes any expenses directly related to the sale, like brokerage fees, legal charges, etc.
Indexed Cost of Acquisition: The original cost is adjusted for inflation using the Cost Inflation Index (CII).
Formula for LTCG (with Indexation):
LTCG=Sale Consideration−(Indexed Cost of Acquisition+Indexed Cost of Improvement+Expenditure on Transfer)
Tax Rate:
LTCG on listed equity shares and equity mutual funds is taxed at 10% (without indexation), provided the gain exceeds ₹1 lakh in a financial year.
LTCG on other assets (e.g., land, property, unlisted shares) is generally taxed at 20% (with indexation).