TAX TREATMENT OF IMMOVABLE PROPERTY RECEIVED AS GIFT 

Gifts of immovable property under the Income Tax Act are taxed if the value of all gifts received without consideration exceeds INR 50,000. If the following conditions are satisfied than immovable property received without consideration by an individual or HUF will be charged to tax.

• Immovable property, being land or building or both, is received by an individual/HUF.
• The immovable property is a capital asset within the meaning of section 2(14) for such an individual or HUF.
• The stamp duty value of such immovable property received without consideration exceeds Rs. 50,000.

When immovable property received by an individual or HUF without consideration (i.e. by way of gift) is not charged to tax 

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

1. Property received from relatives.
2. Property received on the occasion of the marriage of the individual.
3. Property received under will/ by way of inheritance.
4. Property received in contemplation of death of the donor.
5. Property received from a local authority [as defined in Explanation to section 10(20) of the Income-tax Act].
6. 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) [w.e.f. AY 2023-24, this exemption is not available if property is received by a specified person referred to in section 13(3)].
7. Property received from a trust or institution registered under section 12AA or section 12AB [w.e.f. AY 2023-24, this exemption is not available if property is received by a specified person referred to in section13(3)].

Note: Marriage of individual is the only occasion when Gift received by him will not be charged to tax . Apart from marriage there is no other occasion when gift received by an individual is not chargeable to tax. Hence, immovable property received on occasions like birthday, anniversary, etc., without any consideration will be charged to tax. 

Relative for this purpose means. 

      i. In case of an Individual 

• • Spouse of the individual
  • Brother or sister of the individual
  • Brother or sister of the spouse of the individual
  • Brother or sister of either of the parents of the individual
  • Any lineal ascendant or descendent of the individual
  • Any lineal ascendant or descendent of the spouse of the individual
  • Spouse of the persons referred to in (b) to (f).

      ii. In case of HUF, any member thereof 

Taxability of immovable property received without consideration i.e, Gifts from friends 

Gifts (i.e. immovable property received without consideration) received from relatives are not charged to tax. Friend is not a 'relative' as defined in the above list and hence, gift received from friends will be charged to tax (if other criteria of taxing gift are satisfied).  

Tax treatment of Gift of immovable property located abroad 

If the conditions discussed in earlier part (regarding the taxability of gift of immovable property) are satisfied, then gift of immovable property will be charged to tax whether the property is located in India or abroad.

Let us take an Example.
On 1-7-2023, Mr. Amit gifted his house to his friend Mr. Abhishek. The market value of the building was Rs. 9,80,000 and the value of the building adopted by the Stamp Valuation Authority for charging stamp duty was Rs. 10,00,000. Advice Mr. Abhishek regarding the tax treatment in this case.

If the following conditions are satisfied then immovable property received by an individual or HUF will be charged to tax:

• Immovable property, being land or building or both, is received by an individual/HUF.
• The immovable property is a ‘capital asset’ within the meaning of section 2(14) for such an individual or HUF.
• The stamp duty value of such immovable property received without consideration exceeds Rs. 50,000.

The above provisions are not applicable in case of immovable property received from relatives and immovable property received on certain specified occasions.

In the given case, the property is a capital asset for Mr. Abhishek, the property is received from his friend (friend is not covered in the definition of relative), property is not received on any specified occasions and the stamp duty value of the property exceeds Rs. 50,000. In other words, all the conditions required to tax the gift are satisfied and hence the stamp duty value of the property i.e. Rs. 10,00,000 will be charged to tax in the hands of Mr. Abhishek. It will be charged to tax under the head “Income from other sources".

Taxability in a case where an immovable property is received for less than its stamp duty value 

Apart from taxing immovable property received without consideration, i.e., received as gift, the Income-tax Act has also designed 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’ within the meaning of section 2(14) of the Act for such individual or HUF.
• Such property is acquired for a consideration but the consideration is less than the stamp duty value and the difference exceeds higher of Rs. 50,000 and 5% of the consideration.

Note: The Finance Act, 2020 has increase the safe harbor limit of 5% to 10% w.e.f. Assessment Year 2021-22

When immovable property received by an individual or HUF for less than its stamp duty value is not charged to tax 

In following cases, nothing will be charged to tax in respect of immovable property received for less than its stamp duty value-

1. Property received from relatives.
2. Property received on the occasion of the marriage of the individual.
3. Property received under will/ by way of inheritance.
4. Property received in contemplation of death of the donor.
5. Property received from a local authority [as defined in Explanation to section 10(20) of the Income-tax Act].
6. 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) [w.e.f. AY 2023-24, this exemption is not available if property is received by a specified person referred to in section 13(3)].
7. Property received from a trust or institution registered under section 12AA or section 12AB [w.e.f. AY 2023-24, this exemption is not available if property is received by a specified person referred to in section13(3)].
8. Property received by any fund /trust/university/other educational institutions/hospital/other medical institution referred to in section 10(23C)(iv)/(v)/(vi)/(via)(Applicable if Property is received on or after 1st April 2017)
9. Property received by way of transaction not regarded as transfer under clause (viiac)/(viiad)/(viiae)/(viiaf) of section 47.
10. Property received from an individual by a trust created or established solely for the benefit of relative of the individual.

Let us take an Example
On 1-6-2023, Mr. Ankit (a salaried employee) purchased a building from Mr. Sunil for Rs. 20,40,000. The value of the building adopted by the Stamp Valuation Authority for charging stamp duty was Rs. 25,00,000. Advice Mr. Ankit regarding the tax treatment in this case.

If an individual purchases a capital asset, being an immovable property, and the stamp duty value of such property exceeds actual consideration by higher of Rs. 50,000 and 10% of the actual consideration, then the excess of stamp duty value over the purchase price will be charged to tax in the hands of the purchaser.

In the instant case, building is a capital asset for Mr. Sunil. The stamp duty value of the building exceeds the actual consideration by Rs. 4,60,000 which is higher than Rs. 50,000 and 10% of the actual consideration of Rs. 20,40,000, i.e., Rs. 2,04,000. Hence, the above discussed provision shall apply and the differential amount of Rs. 4,60,000 (Rs. 25,00,000 less Rs. 20,40,000) will be treated as income of Mr. Sunil.

For more details click on below link 

Tax In case of Gift received as Cash

Tax In case of Gift received as movable property