If your friend, relative or any other close family member had promised to present you a dazzling diamond studded wrist watch or a beautiful golden necklace worth Rs 3 lakh, it is going to cost you as well. Starting from today, the receipt of gifts in kind are going to be treated as part of your taxable income from now on.
The changes have been effected as per the revamped provisions of Section 56(2)( vii) that are introduced by the Finance Act, 2009. They are effective from today. If you belong to the top tax-bracket of 30.9%, a gift of value mentioned above will draw straight income-tax of Rs 92,700.
Only gifts of any sum of money (and not those in kind) beyond the prescribed limit of Rs 50,000 currently are taxed in the hands of the HUF or recipient individual as income. This is subject to specified exceptions like receipts from relatives and also on the occasion of marriage or those given under a will.
Eight specified properties, comprising land and building, jewelry, shares and securities, archaeological collections, sculptures, drawings, paintings and any piece of art, that is received by an individual or HUF, either by way of gifting or for a purchase consideration treated by the assessing officer as not adequate enough, the market value of these gifts or the differential value worked out of such purchase (if it exceeds Rs 50,000) will be deemed as income from other sources.
A statement from CBDT stated: “The I-T Act 1961 has been amended to provide that any gift-in-kind will become taxable in the hands of the donor, being an individual or a Hindu undivided family (HUF), as income from other sources.” Receipt of any such gifts on or will mandatorily attract tax due on the value of the gift. The recipient will need to disclose their taxable value in the return of income from assessment year 2010-11 onwards. According to CBDT, certain categories are exempted from paying taxes.
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