Individuals receiving shares, jewellery, valuable artefacts or even property valued at over Rs 50,000 as gifts from non-relatives, will have to start paying tax from October 1. The budget has extended the provision to tax cash gifts in the hands of the recipient to all non-cash gifts as well. These will include shares, jewellery, archaeological collections, valuable drawings, paintings or sculptures.
If the value of these assets exceeds Rs 50,000, it will be treated as income for the recipient and taxed according to his or her taxslab. Not just this. Realty deals among nonrelatives for inadeaqute consideration will also come under the tax net, going by the finance bill 2009. If the property is sold for a song, tax will be imposed on the difference between the state government notified rate and the purchase price. Again, the recipient will have to pay tax.
For jewellery or valuable artifacts, received from a non-relative for little or no consideration, a fair market value will be arrived at to determine the tax liability in the hands of the recipient.
According to Sunil Talati, practicing Chartered Accountant and former president ICAI, The new provision has plugged in a major loop-hole in the tax provisions that will prevent tax-evasion . The current provisions were being grossly misused as it was very easy for any person to buy a property and transfer it to another person as gift without having to pay taxes.
The budget has also doubled the limit on the amount that attracts wealth tax. Taxpayers will now have to pay 1% on wealth exceeding Rs 30 lakhs as against Rs 15 lakhs earlier. The provision will come into force from 31st March 2010.
While this may appear as one of the very few incentives proposed by the finance minister, fact remains that this enhancement would hardly impact anyone. Wealth tax is one of the most subdued taxes as income tax authorities have no mechanism to track the same. The discontinuation of filing of documents with the returns have made it even more difficult to track the amount of wealth amassed which keeps increasing at a record pace, thanks to the rising prices.
In fact, by increasing the threshold, even that handful paying the wealth tax may now fall outside the purview of wealth tax, he said.