Gift means transfer by one person to another of an existing movable or immovable property made voluntarily and without consideration in cash or kind, and includes deemed gifts, as provided in the Gift Tax Act, 1958 ("the Act").

Gift tax is charged in respect of gifts made by a person during the year. Most of the definitions given in the Act are same as those under the Income Tax Act. For definitions, refer to The Basics of Income Tax Laws.

Before making a gift, you are advised to carefully go through the list of exemptions given in the later part of this page to ascertain whether the gift falls under the exempt category. If the gift proposed by you is not exempt, gift tax is payable by you. Gift tax is payable by the donor, and not by the donee. A basic exemption of Rs. 30,000 is allowed and the amount over and above this exempt limit of Rs. 30000 is put to tax @ 30%. An incentive is provided if the tax is paid within 15 days of making the gift.

Gifts Exempt From Tax

Following gifts made by any person are exempt from tax:
1. Gifts of immovable properties situated outside India.
2. Gifts of movable properties outside India, unless the donor-
a. being an individual, is a citizen of India and is ordinarily a resident of India, or
b. not being an individual, is Indian resident during the year of gift.
3. Gift of foreign currency by an NRI to a resident relative, of convertible foreign exchange, remitted from abroad.
4. Gift by an NRI out of the balance in his Non-resident (External) Account.
5. Gift of a foreign exchange asset by an NRI to a relative.
6. Gifts of Savings Certificates issued by the Central Government, which the Government notifies as exempt.
7. Gift of Special Bearer Bonds, 1991.
8. Gifts of Capital Investment Bonds by an individual or an HUF subject to a maximum limit of Rs. 10,00,000 per year.
9. Gift of Relief Bonds by the original subscriber to such bonds who is an Individual or an HUF.
10. Gift by an NRI of certain bonds specified by the Central Government, which have been subscribed in foreign currency.
11. Gift to any Government or any local authority.
12. Gift to any fund or institution established for charitable purpose.
13. Gift to any notified gurudwara, temple, mosque, church or any other place of worship.
14. Gift not exceeding Rs. 1,00,000 to a dependent relative, on the occasion of marriage of such relative.
15. Gift under a will.
16. Gift in contemplation of death.
17. Reasonable gift to children for their education.
18. Reasonable gift of bonus, gratuity, or pension by an employer to an employee or the dependants of a deceased employee.
19. Gift to any person in charge of Bhoodan or Sampattidan movement as the Central Government may notify.

Gift Tax Withdrawn

It's Christmas in July! The fourth round of changes to the Union Budget have brought great relief to the taxpayers. The biggest gift came in the form of withdrawal of tax on gifts completely. As per the earlier proposal, the tax was shifted from the donor to the donee. For my analysis of the proposal . Time and again we had been representing to the Government that the administrative cost of collecting tax on gifts was more than the revenue generated from it. The Finance Minister has been bold enough to scrap the tax altogether now. Life is really going to be so easy after the repeal of the Gift Tax Act.

Double taxation relief

In agreement with foreign countries.

Section 90

1. The Union Government may enter into an agreement with the Government of any country outside India-
a. for the granting of relief in respect of income on which have been paid both income-tax under this Act and income-tax in that country, or
b. for the avoidance of double taxation of income under this Act and under the corresponding law in force in that country, or
c. or exchange of information for the prevention of evasion or avoidance of income-tax chargeable under this Act or under the corresponding law in force in that country, or investigation of cases of such evasion or avoidance, or
d. for recovery of income-tax under this Act and under the corresponding law in force in that country, and may, by notification in the Official Gazette, make such provisions as may be necessary for implementing the agreement]

2. Where the Central Government has entered into an agreement with the Government of any country outside India under sub-section (1) for granting relief of tax, or as the case may be, avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent they are more beneficial to that assessee.

Countries with which no agreement exists.

Section 91.

1. If any person who is resident in India in any previous year proves that, in respect of his income which accrued or arose during that previous year outside India (and which is not deemed to accrue or arise in India), he has paid in any country with which there is no agreement under section 90 for the relief or avoidance of double taxation, income-tax, by deduction or otherwise, under the law in force in that country, he shall be entitled to the deduction from the Indian income-tax payable by him of a sum calculated on such doubly taxed income at the Indian rate of tax or the rate of tax of the said country, whichever is the lower, or at the Indian rate of tax if both the rates are equal.

If any person who is resident in India in any previous year proves that in respect of his income which accrued or arose to him during that previous year in Pakistan he has paid in that country, by deduction or otherwise, tax payable to the Government under any law for the time being in force in that country relating to taxation of agricultural income, he shall be entitled to a deduction from the Indian income-tax payable by him-
a) of the amount of the tax paid in Pakistan under any law aforesaid on such income which is liable to tax under this Act also; or
b) of a sum calculated on that income at the Indian rate of tax; whichever is less.

2. If any non-resident person is assessed on his share in the income of a registered firm assessed as resident in India in any previous year and such share includes any income accruing or arising outside India during that previous year (and which is not deemed to accrue or arise in India) in a country with which there is no agreement under section 90 for the relief or avoidance of double taxation and he proves that he has paid income-tax by deduction or otherwise under the law in force in that country in respect of the income so included he shall be entitled to a deduction from the Indian income-tax payable by him of a sum calculated on such doubly taxed income so included at the Indian rate of tax or the rate of tax of the said country, whichever is the lower, or at the Indian rate of tax if both the rates are equal.

Explanation.-In this section,-
1. the expression "Indian income-tax" means income-tax charged in accordance with the provisions of this Act;

2. the expression "Indian rate of tax" means the rate determined by dividing the amount of Indian income-tax after deduction of any relief due under the provisions of this Act but before deduction of any relief due under this Chapter, by the total income;

3. the expression "rate of tax of the said country" means income-tax and super-tax actually paid in the said country in accordance with the corresponding laws in force in the said country after deduction of all relief due, but before deduction of any relief due in the said country in respect of double taxation, divided by the whole amount of the income as assessed in the said country;

4. the expression "income-tax" in relation to any country includes any excess profits tax or business profits tax charged on the profits by the Government of any part of that country or a local authority in that country.

The income tax rules specify relatives from whom tax free gifts can be received. These are:
# Parents
# Spouse
# Your and your spouse�s brothers and sisters
# Brothers and sisters of your parents
# Your lineal descendants (including spouses)
# Lineal descendants (including spouses) of your spouse

Also, the gifts can be exempt even if they aren�t received from these relatives, if they are received during your marriage. So, stop fretting about the Income Tax Department questioning you about the car that was gifted by a distant relative at your wedding. But ensure that the date mentioned on the gift deed is of your marriage day or at least close to that date.

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