Whether it’s for a wedding, celebration, or just to support a loved one, gift-giving is a regular occurrence in Indian homes. Regarding taxes, though, not all about gifts is straightforward. Capital gains tax on gifts is a frequent topic of discussion. Let’s dissect it such that it makes sense.
Taxes on Gifts in India?
Usually, getting a gift is not liable for taxes. Still, the Income Tax Act contains some guidelines:
- Relatives’ gifts are not taxed.
- Additionally, gifts from non-relatives totaling up to ₹50,000 in a year are tax-free.
- Gifts received on events like marriage or through inheritance are exempt.
- Future sale of gifted assets, however, could draw capital gains tax on gifts.
When Should One Pay Capital Gains Tax on Gifts?
Receiving a gift like a house, land, or shares does not result in tax being paid. You might have to pay capital gains tax on gifts, though, should you sell that gifted item later. This is so because capital gain results from the sale, not from the gift itself.
How Is Gifted Asset Capital Gains Tax Calculated?
The crucial bit is here: Calculating capital gains from a sold gifted asset uses the original cost to the giver (or donor). Your period of holding is also augmented with the donor’s holding period.
As an illustration:
- In 2000, your father paid ₹5 lakh for a flat.
- He bestowed it upon you in 2024.
- You sell it for ₹50 lakh in 2025.
In this instance:
- Your purchase price—the same as your father’s—is ₹5 lakh.
- The asset was held for more than two years—including your father’s time—so it is a long-term capital gain.
- You gain indexation, which modifies the purchase price for inflation.
- On an indexed profit, you pay 20% capital gains tax.
How Can One Save Capital Gains? Gift Tax
Here are some clever approaches families and elderly people handle their taxes:
- Invest under Section 54 if you purchase another property, but the sold asset is a house.
- Invest in chosen bonds using Section 54EC.
- Gift to family members in lower tax slabs (though clubbing rules may apply); be careful.
Notable Points to Remember:
- Always write a gift deed for immovable property.
- Save copies of the original purchase records.
- Not the person who gave the gifted item, but the person who sells it pays the capital gains tax.
- From a tax perspective, gifts from relatives are the safest.
In Conclusion:
Although getting a gift could seem like a tax-free blessing, selling that gift later could subject you to capital gains tax on gifts. Knowing the rules helps you avoid surprises, better plan, and maybe save taxes by legal exemption.
See a tax consultant when in doubt—especially if the gift consists of shares or real estate.
