Basics of Indian Gift Tax Act

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.

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-
   1. being an individual, is a citizen of India and is ordinarily a resident of India, or
   2. 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.

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 (see for details). 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.

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