TAX TREATMENT OF MOVABLE PROPERTY RECEIVED AS GIFT BY AN INDIVIDUAL OR HUF

Any prescribed movable property acquired for less than its fair market value by an individual/HUF is charged to tax if the following conditions are satisfied.

• Prescribed movable property is received without consideration (i.e., received as gift).
• The aggregate fair market value of such property received by the taxpayer during the year exceeds Rs. 50,000.

In above case, the fair market value of the prescribed movable property will be treated as income of the receiver.

Note: Prescribed movable property means shares/securities, jewellery, archaeological collections, drawings, paintings, sculptures or any work of art and bullion, being capital asset of the taxpayer and includes Virtual Digital Asset (VDA).

Considering the above definition, nothing will be charged to tax in respect of gift of any item being a movable property other than covered in the above definition, e.g., Nothing will be charged to tax in respect of a television set received as gift, because a television set is not covered in the definition of prescribed movable property.

When prescribed movable property received without consideration, i.e., received as Gift by an individual or HUF is not charged to tax 

In following cases, nothing will be charged to tax in respect of prescribed movable property received without consideration. 

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.Property received from an individual by a trust created or established solely for the benefit of relative of the individual.

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 

Let us take an Example
An individual received gift of jewellery from his friends. The total value of jewellery received during the year as gift from all the friends amounted to Rs. 1,15,000. What will be the tax treatment of gift in this case?

If the aggregate fair market value of prescribed movable property received by an individual or HUF without consideration during the year exceeds Rs. 50,000, then the total value of such properties received during the year without consideration will be charged to tax.

In this case the total value of jewellery received during the year exceeds Rs. 50,000 and hence, Rs. 1,15,000 will be charged to tax.

Taxability when prescribed movable property is received by an individual or HUF for less than its fair market value

If the following conditions are satisfied then prescribed movable property received by an individual or HUF will be charged to tax. 

• Prescribed movable property is acquired by an individual or HUF.
• The aggregate fair market value of such properties acquired by the taxpayer during the year exceeds the consideration paid for these properties by Rs. 50,000. In other words, the aggregate fair market value of all such properties is higher than the consideration paid and the difference is more than Rs. 50,000.

Considering the definition of prescribed movable property, nothing will be charged to tax in respect of gift of any item, being a movable property other than covered in the above definition. e.g., Nothing will be charged to tax in respect of a television set received as gift because a television set is not covered in the definition of prescribed movable property.

When prescribed movable property received for less than its fair market value by an individual or HUF is not charged to tax 

In following cases, nothing will be charged to tax in respect of prescribed movable property received for less than its fair market 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
During the financial year 2023-24 Mr. Alok purchased the following capital assets: 

1.  Gold jewellery purchased for Rs 1,90,000, the fair market value of gold jewellery is Rs 2,90,000.
2.  Bullion purchased for Rs 4,00,000, the fair market value of Bullion is Rs 5,00,000.
3.  Motor car purchased for Rs 3,04,000, the fair market value of car is Rs 5,04,000. Advise him regarding the tax treatment of above items acquired by him.

Any prescribed movable property (meaning has been discussed earlier) acquired for less than its fair market value by an individual/HUF is charged to tax if the following conditions are satisfied.

• Prescribed movable property is acquired by an individual or HUF.
• The aggregate fair market value of such properties acquired by the taxpayer during the year exceeds the consideration paid for these properties by Rs. 50,000. In other words, the aggregate fair market value of all such properties is higher than the consideration paid and the difference is more than Rs. 50,000.

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

Considering above provisions, the tax treatment of various items acquired by Mr. Alok will be as follows: 

1. Gold jewellery and bullion are covered in the definition of specified movable property. The fair market value of gold jewellery is Rs. 2,90,000 and of bullion is Rs. 5,00,000. The purchase price of gold jewellery is Rs.1,90,000 and that of bullion is Rs. 4,00,000. It can be observed that both the properties are acquired for less than its fair market value.
   
   The excess of fair market value over the purchase price will amount to Rs. 2,00,000 (Rs. 1,00,000 for gold jewellery and Rs. 1,00,000 for bullion) which is more than Rs. 50,000. Hence, the entire excess of fair market value over purchase price i.e. Rs. 2,00,000 will be charged to tax in the hands of Mr. Alok. It will be charged to tax under the head “Income from other sources”.
   
   
2. Motor car does not come under the definition of prescribed movable property, hence, nothing will be taxed in respect of purchase of motor car.

Tax relief to COVID-19 patients and their family 

The Finance Act, 2022 has brought amendments to the Income-tax Act to give tax relief to taxpayers receiving financial help from their employers and well-wishers for meeting the expenses incurred on treatment of Covid-19. 

Sum of money or property received for Covid-19 treatment from any other person 

Any sum of money or any property received by an individual, from any person, in respect of any expenditure actually incurred by him on his medical treatment or treatment of any member of his family in respect of any illness related to COVID-19, shall not be charged to tax if he furnished a Statement in Form No. 1 providing the details of amount received during the year.

The statement shall be filed within 9 months from the end of financial year in which the amount is received or 31.12.2022, whichever is later. Further, he shall be required to keep a record of following documents.

• The COVID-19 positive report or medical report if clinically determined to be COVID-19 positive through investigation in a hospital or an in-patient-facility by a treating physician of a person so admitted; and
• All necessary documents of medical diagnosis or treatment for COVID-19 or illness related to COVID-19 suffered within 6 months from the date of being determined as COVID-19 positive. 

Sum of money or property received by family member of a person who died due to Covid- 19  

Any sum of money or any property received by family member of a person who died due to Covid-19, the money or property so received shall not be charged to tax in hands of the family member where such money or property is received from the employer of deceased person.

Where the money or property is received from any other person or persons, the exemption amount shall be limited to Rs. 10 lakh in aggregate. Thus, where the aggregate amount of sum received from other persons during the previous year exceeds Rs. 10 lakh, then the excess amount shall be taxable in the hands of a family member of deceased.

Note: The member must receive the payment within 12 months from the date of death of such person and satisfy the following conditions. 

• The death of the individual should be within 6 months from the date of testing positive or from the date of being clinically determined as a COVID-19 case.
• The family member of such individual shall keep a record of the COVID-19 positive report or medical report if clinically determined to be COVID-19 positive through investigation in a hospital or in an in-patient-facility by a treating physician of a person so admitted.
• The family member of such individual shall keep a record of a medical report or death certificate issued by a medical practitioner or a Government civil registration office, in which it is stated that the death of the person is related to COVID-19.
• The family member furnished a Statement in Form A providing the details of amount received during the year. The statement shall be filed within 9 months from the end of financial year in which the amount is received or 31.12.2022, whichever is later. 

Meaning of Family 

The meaning of family, in relation to an individual, means the spouse and children of the individual and the parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual. 

For more details click on below link 

Tax in case of Gift received as Cash

Tax in case of Gift received as Immovable Property