Tuesday, February 19, 2019

Equalisation Levy


INTRODUCTION

The last two decades have witnessed momentous change in technology. The entire globe has been moving towards digitization in a lightening speed. The world in fact has become a global digital village.

We have witnessed transformation of business, the products, the services, the delivery of products and services, all because of digitization. Digitization knows no boundaries and not limitations. There are no custom barriers and check posts for digital transactions.

The definition of delivery of products and services has been changed. Lot of goods and services, earlier in either tangible or intangible form, now in digital form are being delivered cross border just at a click.

This digitization has resulted in complications in taxation of digital transactions by the nations.

TAXATION – PHYSICAL VERSUS DIGITAL

In the physical transactions or services, the levy of taxation is simple. Few parameters decide the levy of taxes, whether direct taxes or indirect taxes, that include the residency of the service provider or seller, the location of goods or services, the movement of goods, the destination of goods or services, etc. Accordingly, the basis of taxation is decided.

On the other hand, in the era of digitization, the services are provided and accessed on a digital platform which are beyond the scope of geographical boundaries of the countries. Services and intangible goods can be provided from any part of the world and accessed at a different place. This results into difficulties in deciding the parameters of taxation for such digital goods and services.

The services are provided from a server based in a different country, preferably a tax haven, where the rates of taxes on earnings are either zero or considerably lower than the country of service provider or service receiver.

Further, the intangible goods are services are delivered and accessed on a digital platform, that doesn’t know the geographical boundaries. Hence, there is no question of crossing the custom frontiers of the country.

Similarly, as the services are not provided by a person having permanent establishment in the country, the other indirect taxes such as Goods and Service Tax are also not leviable.

DISPARITY

The goods and services that are delivered through a digital platform create disparity amongst the services providers in the country and those from other countries. The resident service providers have to pay taxes and comply to the business regulations of the residence country. The resident service providers cannot compete the overseas service providers in lieu of taxation impact.

Further, the taxes (both direct as well as indirect) on the goods and services so provided on digital platform are being avoided and the government of the country is unable to tax the same. This is the problem with almost every country where the government is unable to collect taxes on such digital transactions.

OECD REPORT ON BEPS

The Organisation for Economic Co-operation and Developmemnt (OECD), consisting of 36 member countries, had constituted a group for study on taxing of such digital transactions and other relevant issues in 2013. Accordingly, the action plan to address the tax challenges of the digital economy was issued under the “Action Plan on Base Erosion and Profit Shifting.” (Source: OECD (2013), Action Plan on Base Erosion and Profit Shifting, OECD Publishing.

In 2015, the group issued its report on “Addressing the tax challenges of the digital economy” which discussed three alternative solutions. One of the solutions in the report was ‘Equalisation Levy’. (Source: OECD (2015), Addressing the Tax Challenges of the Digital Economy, Action 1 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris.

EQUALISATION LEVY

Equalisation Levy is a type of withholding tax which is charged on the services provided on a digital platform across countries. The word “equalization” implies equalising the tax impact of resident service providers in line with the overseas service providers for services provided on digital platform.

In many countries, this equalisation levy is also called as ‘Google Tax’ as Google had the most impact on introduction of such levy. This ‘Google Tax’ or equalisation levy was also adopted by India.

The Honorable Finance Minister Shri. Arun Jaitley had in his budget speech of Union Finance Budged, 2016 had said the following.

“In order to tap tax on income accruing to foreign e-commerce companies from India, it is proposed that a person making payment to a nonresident, who does not have a permanent establishment, exceeding in aggregate Rs. 1 lakh in a year, as consideration for online advertisement, will withhold tax at 6% of gross amount paid, as Equalisation levy. The levy will only apply to B2B transactions.”

Accordingly, relevant provisions were included in Finance Bill, 2016. The provisions of equalisation levy are discussed in the following paragraphs.

APPLICABILITY OF THE LAW

The provisions of Finance Act, 2016 with respect to equalisation levy extend to whole of India, except the state of Jammu and Kashmir.

The said provisions are applicable for payment of consideration made on or after 1st June, 2016.




CHARGE OF EQUALISATION LEVY

Section 165 of the Finance Act, 2016 states as below:

(1)       On and from the date of commencement of this Chapter, there shall be charged an equalisation levy at the rate of six per cent of the amount of consideration for any specified service received or receivable by a person, being a non-resident from —
(i)                  a person resident in India and carrying on business or profession; or
(ii)                a non-resident having a permanent establishment in India.

(2)       The equalisation levy under sub-section (1) shall not be charged, where—
(a)              the non-resident providing the specified service has a permanent establishment in India and the specified service is effectively connected with such permanent establishment;
(b)              the aggregate amount of consideration for specified service received or receivable in a previous year by the non-resident from a person resident in India and carrying on business or profession, or from a non-resident having a permanent establishment in India, does not exceed one lakh rupees; or
(c)              where the payment for the specified service by the person resident in India, or the permanent establishment in India is not for the purposes of carrying out business or profession.

Equalisation Levy @ 6% shall be charged on the provider of specified service in the following scenario:

1.  The service provider is a non-resident person who does not have any permanent establishment in India.

2.  The service receiver is either a person resident in India and carrying on business or profession, or a non-resident who has a permanent establishment in India.

Permanent establishment includes a fixed place of business through which the business of the enterprise is wholly or partly carried on. [Section 164(g)]

3.  The service so provided is a ‘specified service.’ The Government of India has specified the service in section 164(i) of the Finance Act, 2016.

Specified service means online advertisement, any provision for digital advertising space or any other facility or service for the purpose of online advertisement and includes any other service as may be notified by the Central Government in this behalf. [Section 164(i)]

Online means a facility or service or right or benefit or access that is obtained through the internet or any other form of digital or telecommunication network. [Section 164(f)]

4.  The aggregate amount of consideration paid to non-resident service provider as mentioned earlier for such specified services exceeds rupees one lakh during the previous year.

5.  The payment of consideration of such specified service is for the purpose of business or profession only.

COLLECTION, RECOVERY AND COMPLIANCES

Following are the provisions with respect to collection, recovery and compliances of the equalisation levy.

1.  The service receiver (the assessee) who pays the consideration for specified services shall deduct the equalisation levy @ 6% at the time of payment of credit in the books of account.

2.  Such amount so deducted shall be paid to the credit of central government by the 7th of succeeding calendar month. Point is to be noted here that for the month of March the due date shall be 7th April and not 30th April as in case of TDS.

3.  Even if the assessee fails to deduct such levy, the same shall be paid to Central Government irrespective of such failure.

4.  The amount of equalisation levy is to pe paid vide form ITNS-285 that is available on https://www.tin-nsdl.com.

5.  The assessee has to furnish a return of equalisation levy decuted and paid to the credit of Central Government on an annual basis. The same is to be furnished in Form-1 electronically specified by the Equalisation Levy Rules, 2016. The due date for furnishing the form is 30th June after the end of the financial year.

INTEREST, PENALTIES AND PROSECUTIONS

Following are provisions with respect to interests, penalties and prosecution with respect to equalisation levy.

1.  The assessee who fails to pay the amount of equalisation levy to the credit of Central Government within due date has to pay simple interest @ 1% for every month or part of month for the delayed period. [Section 170]

2.  The assessee who fails to deduct whole or any part of equalisation levy shall be liable to pay a penalty of the amount equal to the default. [Section 171(a)]

3.  The assessee who fails to pay the equalisation levy so deducted shall be liable to pay a penalty of Rs. 1,000 per day for which the default continues. However the amount of penalty shall not exceed the amount of equalisation levy deducted. [Section 171(b)]

4.  The assessee who fails to furnish the statement in Form-1 shall be liable to pay penalty of Rs. 100 per day during which the default continues. [Section 172]
It is to be noted that section 172 does not specify the maximum amount of penalty.

5.  The penalty under sections 171 and 172 shall not be imposed unless the assessee has been given a reasonable opportunity of being heard and the assesse proves to the satisfaction of the assessing officer that there was a reasonable cause for the failure. [Section 173]

6.  If the assessee furnishes a statement that is false, or he knows or believes it to be false, or he does not believe it to be true, shall be liable for punishment with imprisonment for a term which may extend to 3 years of with fine or both. [Section 176]

7.  However, the prosecution against any person shall not be instituted except with the prior sanction of the Chief Commissioner of Income Tax.

ASSESSMENT AND APPEALS

Following are the provisions with respect to processing of statements and appeals with respect to equalisation levy.

1.  The statement filed by the assessee shall be processed and an intimation thereof shall be sent to the assessee. Such intimation shall be sent before the end of one year from the end of financial year in which the statement is filed. [Section 168]
2.  If any amount is payable by the assessee by way of equalisation levy, interest, or penalty, an intimation or the notice of demand shall be issued to the assessee. [Rule 7]
3.  An assessee aggrieved by an order imposing penalty, may refer an appeal to the Commissioner of Income Tax (Appeals) within a period of 30 days from the date of receipt of such order. [Section 174]
Such appeal shall be filed in Form-3 accompanied with an appeal fees of Rs. 1,000. [Rule 8]
4.  An assessee aggrieved by an order of Commissioner of Income Tax (Appeals), may appeal to the Appellate Tribunal against such order within a period of 60 days from the date of receipt of such order. [Section 175]
Such appeal shall be filed in Form-4 accompanied with an appeal fees of Rs. 1,000. [Rule 9]

IMPACT UNDER INCOME TAX ACT, 1961

The Finance Act, 2016 has also inserted sub-clause (ib) after sub-clause (ia) in section 40(a) whereby the consideration paid or payable by way of specified services (online advertisement) without deduction or payment of equalisation levy shall be disallowed.

However, the same shall be allowed in a subsequent year when it is paid to the credit of Central Government.

PRACTICAL DIFFICULTIES

The Finance Act, 2016 has imposed equalisation levy of 6% on non-resident persons not having permanent establishment in India for providing online advertisement services to persons resident in India or non-residents having permanent establishment in India.

However, the liability and burden of compliance is imposed on the person who pays such consideration. This is because, the Government of India does not have any jurisdiction on the overseas entities. The levy so charged is in nature of withholding tax.

The practical difficulty faced by the service receivers is that the service providers are not concerned with the taxes and levies applicable for the service receiver. Many of these service providers have clarified that the amount agreed for the services to be provided is deemed to be after all the applicable levies and taxes of the country of service receiver.

In this scenario, the service receiver has to pay the levy from his own pockets. Also, when the amount paid to the overseas service provider is deemed to be after all applicable taxes and levies, the calculation of 6% also changes. This is explained in the below example.

Example 1 – Where the service provider agrees for deduction of equalisation levy.

Consideraton Paid
5,00,000
Equalisation levy @ 6%
30,000
Net Consideration Paid
4,70,000

Example 2 – Where the service provider doesn’t agree for deduction of equalisation levy.

In this case the actual consideration paid is assumed to be the net consideration and levy has to be calculated on inverse basis in the following manner.

        Equalisation Levy = Consideraton Paid x (6 / 94)

In above case, if we assume Rs. 5,00,000 as the net consideration paid, the equalisation levy comes to 31,915.

Also, we need to understand the stand taken by the service providers. The service providers do not agree for the deduction of equalisation levy for the reason that they do not get any deduction of such taxes paid in the country of their residence in absence of any DTAA between such countries with respect to equalisation levy.

CONCLUSION

We can conclude on the following with respect to the equalisation levy.

1.  The government has made an attempt to tax the non-taxable by introducing the equalisation levy in line with OECD Reports.
2.  This reduces the inequality created between the pricing of domestic and overseas service providers.
3.  Even if the levy is charged on overseas service providers, the same is burden of the resident service receiver.

DISCLAIMER

The content of this hand-book is based on the interpretation of the author and is subject to difference of opinion with others. Care has been taken with respect to correctness the legal provisions mentioned herein. However, any errors or omissions are unintentional. The contents of the handbook should not be taken as opinion of the author for entering into any transaction.

Monday, February 18, 2019

Taxation of Gifts under Income Tax Act, 1961


BACKGROUND

Gifts have always been a topic of hot discussion as far as income tax laws in India are concerned. We have experienced a lot of changes in taxability of gifts. It is said that ‘necessity is the mother of inventions’, so I quote that ‘loop hole is the mother of amendments’. Because of various lacunas and loop holes, the income taxation of gifts in India has undergone lot many changes.

These include abolition of Gift Tax Act, changes in limit of gifts accepted from per person to a blanket limit, including gift of immovable properties in tax bracket, etc.

This gives rise to a need for a detailed study the income taxation of gifts in India.

WHAT IS A GIFT?

The dictionary meaning of gift is ‘a thing given to someone without payment.’

Section 122 of Transfer of Property Act, 1882 defines Gift as ‘the transfer of certain existing movable or immovable property made voluntarily and without consideration, by one person called donor, to another, called donee, and accepted by or on behalf of the donee.’

If we analyze this definition, we get the following essentials of a gift.

*   There must be transfer of ownership
*   The ownership must be of a property in existence
*   The property can be movable or immovable
*   The transfer must be without consideration
*   The transfer must be voluntary
*   The donor must be a party competent to contract
*   The donee must accept the gift

So, a gift will be complete only if all the above conditions are satisfied.

Gift has nowhere been defined under the Income Tax Act, 1961.  However, section 56(2)(x) mentions certain moneys and properties received by assessee as taxable in the hands of receiver. These receipts of moneys and properties without any consideration can be construed as gift received by the assessee.

SECTION 56(2)(x)

Section 56(2)(x) of the Income Tax Act, 1961 reads as under:

Where any person receives, in any previous year, from any person or persons on or after the 1st day of April, 2017,—

(a)         any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum;
(b)         any immovable property,—
(A)        without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;
(B)          [for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration:]*

Provided that where the date of agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of agreement may be taken for the purposes of this sub-clause:

Provided further that the provisions of the first proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by way of an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank account, on or before the date of agreement for transfer of such immovable property:

Provided also that where the stamp duty value of immovable property is disputed by the assessee on grounds mentioned in sub-section (2) of section 50C, the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of section 50C and sub-section (15) of section 155 shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of this sub-clause as they apply for valuation of capital asset under those sections;

(c)         any property, other than immovable property,—
(A)        without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property;
(B)          for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration:

Provided that this clause shall not apply to any sum of money or any property received—

(I)                          from any relative; or
(II)                       on the occasion of the marriage of the individual; or
(III)                     under a will or by way of inheritance; or
(IV)                  in contemplation of death of the payer or donor, as the case may be; or
(V)                     from any local authority as defined in the Explanation to clause (20) of section 10; or
(VI)                  from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or
(VII)                from or by any trust or institution registered under section 12A or section 12AA; or
(VIII)             by any fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10; or
(IX)                   by way of transaction not regarded as transfer under clause (i) or clause (iv) or clause (v) or clause (vi) or clause (via) or clause (viaa) or clause (vib) or clause (vic) or clause (vica) or clause (vicb) or clause (vid) or clause (vii) of section 47; or
(X)                      from an individual by a trust created or established solely for the benefit of relative of the individual.

Explanation. —For the purposes of this clause, the expressions "assessable", "fair market value", "jewellery", "property", "relative" and "stamp duty value" shall have the same meanings as respectively assigned to them in the Explanation to clause (vii).

{* This sub clause shall be substituted by Finance Act, 2018 with following words w.e.f. 1st April, 2019

For a consideration, the stamp duty value of such property as exceeds such consideration, if the amount of such excess is more than the higher of the following amounts, namely:—
(i)                          the amount of fifty thousand rupees; and
(ii)                       the amount equal to five per cent of the consideration:}

SECTION 56(2)(x) – AN ANALYSIS

The sub clause (x) of clause (2) to section 56 was inserted by the Finance Act, 2017 w.e.f. 1st April, 2017. This clause defines taxability of amounts or properties received without any consideration. These are referred to as ‘gifts’ in common parlance. Accordingly, the following amounts are taxable. However, these amounts are subject to exceptions that are mentioned thereafter.

1.  Whole amount of money received (from person or persons), if it exceeds Rs. 50,000.

If a person receives from any other person or persons amounts exceeding Rs. 50,000 in aggregate, then entire such sum is taxable. This limit is not per payer but in aggregate. Also, point is to be noted that the amount of Rs. 50,000 is not a threshold exemption, but a maximum limit exceeding which the entire amount becomes taxable.

So, if a person receives Rs. 25,100 and Rs. 25,000 from two different persons, then as the aggregate amount being Rs. 50,100 exceeds Rs. 50,000 the entire amount of Rs. 50,100 is considered as taxable income charged under income from other sources. The same principle applies to other sub clauses under section 56(2)(x).

2.  The stamp duty value of an immovable property received without any consideration, if such value exceeds Rs. 50,000.

If a person receives from another person or persons, any immovable property without any consideration, and the stamp duty value of such property exceeds Rs. 50,000 in aggregate, such entire amount becomes taxable. This provision relating to gift of immovable property was introduced w.e.f. 1st October, 2009.

Whereas, in case of amount of money received or property other than immovable property is received, the aggregate of the amount received during the year is considered for the limit of Rs. 50,000, in case of an immovable property, the limit of Rs. 50,000 is counted separately for each property.

3.  The differential amount in the stamp duty value and actual consideration of an immovable property where the actual consideration is less than the stamp duty value, and the difference in such value exceeds Rs. 50,000.

If a person receives from another person or persons an immovable property where the consideration paid for the same is less than the stamp duty value and such difference is more than Rs. 50,000 then entire such difference is considered taxable.

This creates a practical difficulty in cases where the fair market value of the immovable property is less than the stamp duty value of the said immovable property. In such cases, the assessees may face hardship as the amount becomes taxable despite not in the nature of income (gift).

However, to avoid this difficulty, the third proviso states that in such cases, the assessing officer may refer the case to valuation officer for assessing the fair market value of the property. This proviso is a relief to assessees in bonafide cases.

Another difficulty comes in case of properties with huge valuation and the consideration so paid in marginally less than the stamp duty value but more than Rs. 50,000. For example, a property having stamp duty value Rs. 5 crores, is purchased for a consideration of Rs. 4.80 crores. In this case the difference is marginal however more than 50,000.

This difficulty is removed by Finance Act, 2018 w.e.f. 1st April, 2019 where the difference if less than 5% of consideration shall not be taxable.

4.  The fair market value of any property, other than immovable property, received without any consideration, if such value exceeds Rs. 50,000.

If a person receives any property, other than an immovable property, from another person or persons, the aggregate value of which exceeds Rs. 50,000 then the entire of such value of the property so received becomes taxable. This provision has been introduced w.e.f. from 1st October, 2009.

5.  The differential amount in the fair market value and actual consideration of any property, other than immovable property, where the actual consideration is less than the fair market value, and the difference in such value exceeds Rs. 50,000.

If a person receives from another person or persons any property, other than an immovable property, where the consideration paid is less than the fair market value of such property and such difference exceeds Rs. 50,000, the aggregate of such difference becomes taxable.



Following are some illustrations on the above provisions.

Type of Property
Value
Consideration Paid
Taxability
Money
45,000
0
No
Money
51,000
0
Yes
Money
A – 24,000
B – 24,000
0
No
Money
A – 24,000
B – 26,100
0
Yes
Immovable Property
49,000
0
No
Immovable Property
51,000
0
Yes
Immovable Property
5,00,000
4,60,000
No
Immovable Property
5,00,000
4,40,000
Yes
Immovable Property1
25,00,000
24,60,000
No
Immovable Property1
25,00,000
24,00,000
No
Immovable Property1
25,00,000
23,75,000
Yes
Other Property
49,000
0
No
Other Property
51,000
0
Yes
Other Property
1,00,000
51,000
No
Other Property
1,00,000
45,000
Yes

1 – Introduced by Finance Act, 2018 applicable for transactions entered into after 1st April, 2019.



EXCEPTIONS

The aforementioned provisions are subject to certain exceptions. The amounts received from following persons or on following occasions are exempt from tax even received without sufficient consideration.

1.  From relatives:If any amounts of money or property are received from relatives of the individual, such amounts are exempt from tax. The proviso to clause (vii) also mentions the list of relatives which is as under.

a.  In case of an individual
                                                 i.      Spouse of the individual
                                               ii.      Brother of the individual
                                             iii.      Sister of the individual
                                           iv.      Brother of the spouse of the individual
                                             v.      Sister of the spouse of the individual
                                           vi.      Brother of the either of the parents of the individual
                                         vii.      Sister of the either of the parents of the individual
                                       viii.      Lineal ascendant or descendant of the individual
                                            ix.      Lineal ascendant of descendant of the spouse of the individual
                                              x.      Spouse of above-mentioned persons

b.   In case of a Hindu Undivided Family – its members.

In case of relatives of an individual, it is not necessary that the exemption is available reciprocally for all relatives. For example, amount received by the nephew from his uncle is exempt, but amount received by the uncle from his nephew is not exempt. So, utmost care is to be taken to ascertain the exemption status before determining the taxability of the transaction.

In case of a Hindu Undivided Family, amount received from its members is exempt. However, amount received by an individual from HUF is not exempt.[Gyanchand M. Bardia v. Income Tax Officer,(Ahmedabad - Trib.) 2018 ITL 1035]

2.  On occasion of marriage: Amounts of money or property received by an individual on occasion of his / her marriage, without consideration are exempt. The exemption is simple but again care has to be taken to understand that such amounts or property received on occasion of marriage, and not before or after that, are exempt. For example, money or property received at the engagement ceremony, or received before or after marriage at any other occasion, etc. are not exempt.

Gifts received on occasion of marriage of child are not exempt at the proviso specifically mentions “on occasion of marriage of the individual” [Rajinder Mohan Lal v. Dy. CIT, Punjab and Haryana High Court, 2013]

3.  Under a will or by inheritance: Amount of money or property received by a person under a will of a deceased person or are inherited by the person are exempt.

4.  In contemplation of the death of the payer: If a person receives any money or property without sufficient or without any consideration from a payer in contemplation or his / her death, it is treated as not taxable.

5.  From local authority: If any amount of money or property is received from a local authority defined under explanation to section 10(20) such receipts are exempt from tax.

6.  From a fund, foundation, university, educational institution, hospital or medical institution referred to under section 10(23C): If any amount of money or property is received from the afore mentioned entities those are referred to under section 10(23C), such amount of money or property is exempt from tax.

7.  From trust or institution registered u/s 12AA: If any amount of money or property is received from trusts or institutions registered u/s 12AA of the Income Tax Act, such amount of money or property is exempt from tax.

8.  By way of transaction not regarded as transfer:If any amount money or property is received by way of a transaction that is not regarded as transfer pursuant to clause (vicd) or clause (vid) or clause (vii) of section 47, then such amount of money or property is not regarded as taxable.

The respective transactions not regarded as transfer are mentioner hereunder.

a.  by a shareholder, in a business reorganisation, of a capital asset being a share or shares held by him in the predecessor co-operative bank if the transfer is made in consideration of the allotment to him of any share or shares in the successor co-operative bank.(vicd)
b.  any transfer or issue of shares by the resulting company, in a scheme of demerger to the shareholders of the demerged company if the transfer or issue is made in consideration of demerger of the undertaking. (vid)
c.  any transfer by a shareholder, in a scheme of amalgamation, of a capital asset being a share or shares held by him in the amalgamating company, if—
(a)          the transfer is made in consideration of the allotment to him of any share or shares in the amalgamated company except where the shareholder itself is the amalgamated company, and
(b)          the amalgamated company is an Indian company. (vii)

PROPERTY

For the purpose of section 56(2)(x), property means the following capital asset of the assessee, namely –

a.  immovable property being land or building or both
b.  shares and securities
c.  jewellery
d.  archaeological collections
e.  drawings
f.      paintings
g.  sculptures
h.   any work of art
i.       bullion

Any other asset apart from the above-mentioned property is not considered as ‘property’ for the purpose of this section.

GIFT DEED

Following points are relevant with respect to gift deed.

1.   The gift of an immovable property is complete only if it is done vide a gift deed and the same is registered and requisite stamp duty is paid.
2.   The gift of a movable property or money doesn’t require a gift deed. However, it is advisable to make a gift deed for movable property and money also.
3.   The gift deed should also contain the acceptance of the receiver of gift as the gift transaction is not complete unless accepted by the donee.

OTHER POINTS FOR CONSIDERATION 

Few other points of consideration in case of transaction of gifts are as below:

1.   In case of gift of money received for Rs. 2,00,000 or above in cash, the penalty u/s 269ST shall get attracted.
2.   The onus to prove the transaction of the gift lies on the receiver of the gift.
3.   In case of gifts that are exempt owing to the proviso to section 56(2)(x), the existence, genuineness and credibility of the donor is also required to be proved and the onus is on the receiver to prove it.
4.   The effect of other applicable laws like Registration Act, Stamp Duty Law, Transfer of Property Act, Goods and Service Act, and other relevant laws has also to be considered for respective treatment.

DISCLAIMER

The content of this hand-book is based on the interpretation of the author and is subject to difference of opinion with others. Care has been taken with respect to correctness the legal provisions mentioned herein. However, any errors or omissions are unintentional. The contents of the handbook should not be taken as opinion of the author for entering into any transaction.

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