Gift Tax in India refers to the tax implications on the transfer of money or property from one person to another without any consideration (i.e., without receiving anything in return). While the term "Gift Tax" existed under the Gift Tax Act, 1958, it was abolished in 1998. However, the concept still exists under the Income Tax Act, 1961, particularly under the head "Income from Other Sources."
As per current tax provisions, if an individual or Hindu Undivided Family (HUF) receives gifts exceeding ₹50,000 in a financial year (in cash, cheque, property, or other assets) without any consideration, the total value of such gifts becomes taxable in the hands of the recipient. The amount is added to the recipient’s income and taxed as per applicable slab rates.
However, there are important exceptions. Gifts received from certain relatives (such as parents, spouse, siblings), or on specific occasions like marriage, inheritance, or through a registered will, are not taxable.
For small business owners and entrepreneurs, understanding Gift Tax provisions is essential for:
- Avoiding unintentional tax liabilities during capital infusions from friends or family.
- Structuring funding or asset transfers in a tax-compliant manner.
- Ensuring accurate filing of income tax returns when receiving gifts above the threshold.
It’s also important during business registration or compliance reviews, as unexplained credits or gifts may be scrutinized by tax authorities.
For professional guidance on reporting gifts and staying compliant with income tax laws, explore our tailored solutions at FinTax24.
In summary, while there is no separate Gift Tax Act in force today, the taxation of gifts is an active part of income tax compliance and must be carefully managed.