Tax On An Immovable Property Gift: Who Should Pay?

Yes, individuals need to pay tax on gift received which are subject to many exemptions.

If an individual, receives an aggregate value of any gift during the year that exceeds Rs 50,000 and is not covered under the specified exceptions he or she is liable to pay tax.

Individuals are also liable to pay gift tax on immovable property, being land or building or both depending on the occasion of gift or person who is gifting.

4 reasons when you are liable to pay tax on immovable property gift.

1. Immovable property, being land or building or both, is received by an individual/HUF.
2. The immovable property is received without consideration (i.e., received as a gift) or for a consideration which is less than the stamp duty value of the property by an amount exceeding Rs. 50,000.
3. The immovable property is a 'capital asset' within the meaning of section 2(14) for such as individual or HUF.
4. The stamp duty value of such immovable property received without consideration exceeds Rs. 50,000.

The Income-tax Law has also designed the provisions for taxing immovable property received for less than its stamp duty value.

If following conditions are satisfied, then immovable property received by an individual or HUF for less than its stamp duty value will be charged to tax:

• Any immovable property is acquired by an individual or a HUF.
• The immovable property is a 'capital asset' for such individual or HUF.
• Property is acquired for a consideration but the consideration is less than the stamp duty value and the difference exceeds Rs. 50,000.
• In above cases the excess of stamp duty value over the purchase price of the property will be treated as income of the purchaser.

In the following cases gift of immovable property will not be charged to tax.

• Property received from relatives (*).
• Property received by a HUF from its members.
• Property received on the occasion of the marriage of the individual.
• Property received under will/ by way of inheritance.
• Property received in contemplation of death of the donor.
• Property received from a local authority as defined under section 10(20) of the Income-tax Act.
• Property received from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in section 10(23C).
• Property received from a trust or institution registered under section 12AA .

Who are relatives under Income tax act?

a) Spouse of the individual;

(b) Brother or sister of the individual;

(c) Brother or sister of the spouse of the individual;

(d) Brother or sister of either of the parents of the individual;

(e) Any lineal ascendant or descendent of the individual;

(f) Any lineal ascendant or descendent of the spouse of the individual;

(g) Spouse of the persons referred to in (b) to (f).

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