GOKULDAS KAMATH (EX BANKER) 27 August 2013

Whether income tax on gifts applicable

A B and C are 3 brothers.They had a ancestral property in joint names

A is childless,B is having 4 sons and 3 daughters but very poor and C was very rich and affluent with 5 children who are also well settled in life.

A and C had gifted their share in the above property (total 2/3rd) to Mr.Z,the eldest son of Mr.B in 2005

A B C died long back.

Mr.Z sold above property for Rs.1.00 crore,kept 67 lakhs for himself ( 2/3 rd share of A and C) and distributed Rs.33.00 lakhs towards his father's share( Mr.B) to his brothers and sisters including his own share (33 lakhs divided by 7)

Now,whether his share of Rs.67.00 lakhs gifted by A and C is a taxable income.Whether the 1/7 th share in Rs.33.00 lakhs is also taxable income for 7 children of Mr.B

Please kindly clarify this point

Reply Follow

2 Replies

Vallabh Parmar (Advocate) 27 August 2013

Z got Rs 67/- lacs on sale of that part of property (2/3rd) which was gifted to him by his uncles and gift was received in 2005.

The provision relating to taxing gift received by individul or HUF, (as income from other sources ) came in to effect from 1/10 /2009 and again such gift is not taxable as same is received by Z from his Uncles [from direct lineal ascendent ) which is not taxable us 56 (vii)of I T Act. in view of proviso to said sec 56(vii) .

Thus in short such gift is not taxable on following two grounds

a]the law taxing such gift as income from other sources i.e.u/Ss 56 was not in existance as gift was received in 2005

b) the gift is received from uncle so same cannot be taxed .

The remaining share (one seventh of Rs 33lacs ) received from share of Z's father is also not taxable as same is received from father 's property and will constitute distribution of share of property of HUF to its member on sale of HUF property if father has died without will .