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Last Updated : Sep 08, 2014 03:21 PM IST | Source: Moneycontrol.com

Conditions on which gift tax is calculated

There are several conditions that are applicable when it comes to the calculation of gift and the levy of the tax on the amount that has been received by the individual.

Arnav Pandya

There are several conditions that are applicable when it comes to the calculation of gift and the levy of the tax on the amount that has been received by the individual. The basic conditions related to the whole process are simple which is that the amount should not have come from relatives that are defined under the Income Tax Act. At the same time an amount that is upto Rs 50,000 a year then this would not be taxed and only figures above this would come under the tax net. Most people consider a simple case where there is a gift given to someone else but there are various ways in which this can have taken place. Here is a look at several conditions that would have been present where the gift tax conditions come into being.

Amount given as sum of money
One of the simplest ways in which people give gifts is through the route of using money. This is simple in the sense that it involves all the ways in which one would normally deal with money. For example the easiest and most common way is to give cash and this gift is seen at most places. If this is not the case then this is given through a cheque or a draft and once again the amount is transferred through the normal ways in which money is remitted. When this is done then the individual has to know that the conditions for the taxability of the gift would be fulfilled and hence this would be covered.

Immovable property without consideration
There are times when there is no money that actually changes hands but the individual actually receives a gift through the route of an immovable property then this would be covered. The term immovable property has to be understood in the normal sense of the term which is that this would include something like a house property that cannot be taken from its place of existence to any other place. It would even include land and there are lots of situations wherein a person gives an immovable property to another one as a gift and this is significant as it would be covered under the consideration of being a gift. Here the condition is that the property is gifted without any consideration.

Movable property without consideration
It is not necessary that people give only immovable property for there can be a movable property that is the subject matter of the gift. And in this case there is no consideration that is involved in the entire transaction. Movable property means assets like shares and securities, jewellery, archaeological collections, drawings, paintings, sculptures or any work of art and even bullion (after June 1, 2010). Whenever there is any such asset then the gifting of this would be considered as a part of the process that would lead to taxability of the transaction and one has to be careful about the details and the valuation of such a gift This is a very comprehensive area as so many areas are covered by the condition.

Movable property for a lesser consideration
There is also another condition wherein a movable property is given as a gift and there is a consideration that is lesser than the market value of the item. This is significant because just due to the fact that there is some amount that is paid as consideration would not take the transaction out of the tax net. If this is less than the fair market value of the item then this would still be covered and there could be a tax liability that arises in the whole matter.

First Published on Sep 8, 2014 03:21 pm