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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Concepts in Taxation

Caselet: Mr. Suresh Iyer, a resident individual, receives a gift of Rs 80,000 in cash from his friend and a gift of Rs 5,00,000 from his father on his birthday. For a resident individual, under the general gift taxation rules, how are these treated?

The Rs 80,000 gift from the friend is taxable because aggregate gifts from non-relatives exceed Rs 50,000 in the year, and the whole amount is taxed. The Rs 5,00,000 gift from the father is fully exempt as gifts from specified relatives have no limit.

  1. ABoth gifts are taxable as income from other sources
  2. BGift from friend is taxable as aggregate gifts from non-relatives do not exceed Rs 50,000 in the year; gift from father is exemptCorrect
  3. CGift from friend is exempt as it is below Rs 1,00,000; gift from father is taxable
  4. DBoth gifts are exempt

Explanation

Gifts in cash received from non-relatives are taxable under income from other sources if the aggregate exceeds Rs 50,000 in a year; here Rs 80,000 exceeds it, so the whole Rs 80,000 is taxable. Gifts from specified relatives such as a father are fully exempt without limit. Hence the friend's gift is taxable and the father's is not.

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