sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Latest Expert Exchange
« Indirect Tax »
 CBDT notifies new I-T return forms
 Here are the key changes in tax rules to come into effect from today
 GST revenue growth in 2018-19 to match last 10 years’ indirect tax growth, says SBI report
 Things You Should Know Before Filing Your Income Tax Returns (ITR)
 All education loans do not get income tax benefits
 FM Arun Jaitley to focus on direct and indirect taxes
 Income Tax For Individuals – Assessment Year 2019–20
 States set separate dates to implement e-way bill
 What are direct and indirect taxes?
 Indirect transfer conundrum continues
 We expect significant changes in income tax slabs, say taxpayers

Have a real estate gift? Factor in tax rules
November, 22nd 2014

Real estate occupies a substantial share of an individual’s asset base and it is not uncommon for ownership of real estate (referred to as property) to pass on to family members by way of a gift or under a will.

A gift in common parlance means something given voluntarily without payment in return (i.e. for ‘Nil’ consideration), while the meaning as per the Transfer of Property Act, 1882 is transfer of certain existing moveable or immoveable property made voluntarily and without consideration, by one person to another. Generally, a gift of property is documented in writing by a gift deed.

In this article, income tax implications on gift of property (held as an investment i.e. a “capital asset”) have been outlined. A gift is commonly understood as a transfer of an asset from one person to another. However, ‘gift’ is a disregarded ‘transfer’ for the purposes of computing income under the head ‘capital gains’. In other words, there should not be any income tax payable or loss allowable for the donor on account of the gift transaction. This is on the presumption that the genuineness of the gift transaction is not under question.

Now, coming to the income tax implications for the recipient on account of the gift transaction. In cases where an individual taxpayer receives an immovable property without consideration from another individual, then income tax implications need to be evaluated in the hands of such recipient, being an individual. In this connection, following is the taxability mechanism in the hands of the recipient, being an individual:

# Immovable property received “without consideration”: If the stamp duty value exceeds Rs 50,000, the stamp duty value of such property would be taxable as income.
The above aspect is explained by way of an illustration.

The income on account of the gift transaction (as outlined above) is taxable in the hands of the recipient, being an individual under the head ‘income from other sources’ and taxable at normal tax rates (as per applicable income slabs). Following are the exceptions in respect of taxability of gift transactions:

# Gift received from relatives (refer chart below for definition of relatives) or
# Gift received on the occasion of the wedding of the recipient or
# Gift received in contemplation of death of the donor.

In case of the above exceptions, income is not considered taxable in the hands of the recipient, being an individual and this is explained below by way of an illustration.
The following additional aspects are of relevance in case of gift transactions and should be noted:

# In cases where real estate become the property of the taxpayer on account of receipt of gift and that transfer is disregarded for the purposes of computing ‘capital gains’, the cost of such real estate for the donor would be considered as the cost

of acquisition in the hands of the recipient of such gift. This is explained below by way of an illustration and outlines a case in which gift transaction was considered not taxable in the hands of the recipient. # In cases where the value of the real estate (i.e. stamp duty value) is taxed in the hands of the recipient, the amount taxed would be regarded as cost of acquisition for such recipient.

This is explained below by way of an illustration and outlines a case in which gift transaction was considered taxable in the hands of the recipient. The above aspects would be relevant when the gifted property is sold by the recipient (i.e. person receiving the gift).In addition to income tax, one needs to consider other implications such as legal, stamp duty (based on respective state legislation) in respect of property gift transactions.

Given that property transactions are high value and complex on account of various factors, it is advisable for the taxpayer to seek professional guidance from income tax experts while entering into such transactions.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Achievements

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions