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    Oct 9, 2009

    GIFT- INCOME TAX NEW RULING

    The Income Tax Act 1961 (the Act) has been amended with effect from 1st October 2009
    to provide that any gift-in-kind, being an immovable property or any other property, the value of
    which exceeds Rs.50,000 (rupees fifty thousand), will become taxable in the hands of the donee,
    being an individual or a Hindu Undivided Family (HUF), as income from other sources under
    clause (vii) of sub-section 2 of section 56 of the Act. Therefore, any such person who receives a
    gift of any such property on or after 1st October 2009 must pay the income tax due on the value
    of the gift and disclose the taxable value of such property in the return of income for assessment
    year 2010-11 and subsequent years.
    The following types of gifts will, however, not be subject to tax, i.e. gifts (a) from a
    person who is a relative; (b) on the occasion of marriage of the individual; (c) under a will or by
    way of inheritance; (d) in contemplation of death of the donor; (e) from any local authority as
    defined in the Explanation to section 10(20) of the Act; (f) from any fund or trust established
    under section 10(23C) of the Act; (g) from any trust or institution registered under section 12AA
    of the Act.
    Relative is defined in the Act as (i) spouse; (ii) brother or sister; (iii) brother or sister of
    the spouse; (iv) brother or sister of either of the parents; (v) any lineal ascendant or descendant;
    (vi) spouse of any of the relative at clauses (ii) to (v); of the individual. Gifts received from
    these relatives will not be subject to tax.
    Earlier cash gifts exceeding Rs.25,000 were subject to tax with effect from 1st April
    2004. Later the Act was amended with effect from 1st April 2006 to tax all cash gifts having
    aggregate value exceeding Rs.50,000. Cash gifts also enjoy exemptions as is available for giftsin-
    kind.

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