2024-09-13 16:42:06
New Delhi: If one of your brothers is living abroad and he sends you lakhs of rupees as a gift, will you have to pay tax on it? A similar case came up in the Income Tax Appellate Tribunal in Mumbai recently. This tribunal has ruled that the gift of lakhs of rupees received from a non-resident brother is not subject to tax. It highlights the exemptions available under Indian tax laws for certain gifts, especially gifts received from close relatives.
what is the matter
Mumbai resident A. Salam was gifted Rs 20 lakh by his brother living in UAE. The Income Tax Department declared it taxable. He raised the matter with the Income Tax Department’s Appeal Commissioner but did not get any relief from there either. After this, Salam knocked the door of ITAT Mumbai. He told the tribunal that his brother has been living in Dubai for more than 25 years and is doing business. He has given the gift out of love and brotherhood. This amount has been given through cheques of Bank of Baroda and ICICI Bank. Salam also presented the gift deed in this regard.
What does ITAT have to say
ITAT member Prashant Maharshi said that this was indeed a gift from a brother. He found that the names of the parents of both the donor and the recipient matched, which confirmed that they were real brothers. Based on this evidence, Maharshi concluded that the Rs 20 lakh received by A Salam should not be considered taxable income and directed the income tax officer to remove the tax classification.
There is tax on gifts above 50 thousand but there is exemption in this
Under the Income Tax Act, while gifts above Rs 50,000 are generally taxed as ‘income from other sources’, there are a number of exemptions. Notably, gifts received from close relatives, on the occasion of marriage or by way of inheritance are exempt from tax. This is provided for in Section 56(2)(x) of the Income Tax Act. Under this, gifts received from a brother are exempt.