Gift tax in India

Gift Tax Act, 1958
Enacted by	Parliament of India
Status: Repealed

This act has been repealed w.e.f. 1st October, 1998.

Gift Tax Act, 1958 was an Act of the Parliament of India which was enacted to impose tax on the act of giving or receiving gifts under certain circumstances as specified by the Act..

As per the Gift Tax Act, the gifts that exchanged hands post 1 April 1958 were subject to taxes as mention in Schedule I.

Post 1 April 1987, this was amended to the rate of 30% (Thirty percent) and included gifts that were made in that particular Assessment Year. On 1 October 1998 however, the applicability of Gift Tax ceased to exist.

As per the Gift Tax Act 1958, gift (in the form of cash, draft, check or others) is an excess of Rs. 50,000/- received from one who doesn’t have any blood relations with the donee, were taxable. However, from 1st October 1998, Gift Tax got demolished and all the gifts made on or after that date were Tax-free. But in 2004, the Gift Tax Act was again renewed partially, and a new provision was inaugurated in the Income Tax Act 1961 under Section 56 (2). According to Gift Tax Act, 1961 the gifts received by any individual or HUF more than Rs.50,000/- in a year would be taxable.

The Gift Tax Act also made mention of applicability of the Act on certain transfers that took place. When a property was transferred for any other reason than adequate consideration, the amount by which the value of the property exceeded the value of consideration was considered to be a gift, and thus subject to tax.

In addition, when the consideration for which a property is transferred has not passed on the entire or part amount from the transferee to the transferor, the amount that had not passed too was subject to Gift Tax.

In cases related to forfeitures, releases, surrenders, or abandonment of certain contracts, debts, actionable claims, or even interest in property, the extent of value of the said action was also subject to Gift Tax, but only after the Assessing Officer found that the action was bona fide.

When the amount of appropriation is made on a property in cases where the party or tenant that has an interest in the party relinquishes it, then said appropriation that is benefited by the other person is termed as a gift and therefore subject to Gift Tax.

In case of a Hindu Undivided Family, when a member’s individual property is relinquished to the properties held by the family too, the Gift Tax Act was applicable.

There were certain exemptions that were allowed under the Gift Tax. In case of the exchange of gifts between blood relatives, irrespective of the value of the gift, Gift Tax was not applicable.

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