Tax on gifts received under Section 56(2)(x)

The Income Tax Act of 1961 mentions a total of five income sources: salaries, rent-based income, capital gains, company and professional profits and gains and income from other sectors. The last one comes under the residuary incomes, which may need proper earnings receipts.

Here you can see the details of the income from other sources.

• All dividends are subject to taxation, and it comes under section 56(2)(i). They will be considered the category of “income from other sources”.
• Winnings from lotteries, racing, games, etc., are a one-time income. These kinds of incomes are subject to a tax rate of 30% along with a 4% cess.
• An employer receives a few amounts in the form of ESI, etc. In case the employer does not credit the money to the proper fund account, then the amount will be taxable.

 

What is Section 56(2)(x) of Income Tax Act?

Section 56(2)(x) mentions that following receipts will be taxed on or after April 1, 2017. Here are those receipts.

• When the total sum of money crosses Rs 50,000 in aggregate without any other consideration.
• For any immovable property received without any consideration, the stamp value should exceed Rs 50,000.
• Any immovable property received for consideration that has a value of less than Rs 50,000.
• For any property or assets other than an immovable property without consideration, the fair market value should exceed Rs 50,000.
• Any property or asset other than immovable property that has a fair market value of less than Rs 50,000.

Section 56(2)(x) of the Finance Act of 2018 has been adjusted for the annual year 2019–20 to remark that any moveable property received for consideration should have its stamp duty value exceed such consideration if the amount of such excess is greater than the higher of the following amounts:

• The sum of Rs 50,000
• The equal amount will be 5% or 10% from the financial year 2021-2022

See also: Section 17 (1) of Income Tax Act: Which incomes are classified as salary?

 

What is the significance of Section 56(2)(x) of Income Tax Act?

Anyone who received money or property with a value exceeding the specified amount from any person or persons during the previous year is subject to the provisions of section 56(2)(x). However, receipts from specific individuals are not subject to section 56(2)(x). As a result, section 56(2)(x) applies if:

• The individual receives a specific sum of money or property from one or more individuals
• The cash or property was received on or after April 1, 2017
• No specific people have received the money or property

 

Section 56(2)(x) of Income Tax Act: Where is it not applicable?

There are a few areas where section 56(2)(x) will not work.

• If the property is received from any relative
• If the property is received on a special day like a marriage
• If the property is received via will
• If the property is received from a foundation or any trust

Section 56(2)(x) of Income Tax Act: Properties covered

Here is the list of properties that come under section 56(2)(x).

• Land or building
• Shares or securities
• Jewellery
• Painting
• Sculptures
• Bullion

See also about: Section 115H of Income Tax Act

 

FAQs

Which income comes under exempt income?

Dividends, agricultural income, interest on funds, capital gains, etc., come under exempt income.

How can you calculate chargeable income?

You can measure the chargeable income by deducting the exemptions and deductions as allowed in income tax from the total income earned.

How can I claim my lifetime capital gains exemption?

In order to claim your lifetime capital gains exemption, you need to fill out Form T-657.

How much exemption can I claim?

The basic exemption limit for persons whose age is below the age of 60 years is Rs 2.5 lakh. For senior citizens, this exemption limit will be changed to Rs 3 lakh.

Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com