The Indian Finance Minister has promised to come good on lot of forward looking changes like imposing common goods tax and other reforms to combat inflation. On 28th February 2014, the Union Budget for the year 2013-14 will be presented and there is much anticipation regarding the same.
Few of the changes that are expected are in Rent Allowance Tax, Capital Gain Scheme, Senior Citizen Rebate, Leave Travel Allowance, Goods and Services Tax, Gift Tax, etc.
Gift Tax Amendments
Up until 1998, Gift Tax was deducted at source. The giver had to pay the tax for the amount gifted. In 1998 the Government abolished this method but brought back a new Taxation method in 2004 under the Income Tax Act, under which Gift Tax could be collected from the end of the receiver.
Any gift amount that exceeds Rs 50,000 is Taxed on the receiver, including NRIs. The gift value is considered as part of the receiver’s total income and taxed accordingly. Cashless gifts like land or jewellery should originate from India so that its true valuation is done.
The value of the movable properties will be based on the Stamp Duty value, whereas other properties such as shares and securities, art works, jewellery, land etc., will be valued based on the market value.
There are certain exemptions in the taxation of the gifts. Gifts given by a blood relative, like spouse, siblings, parents, children, etc., are exempted. Gifts received on the occasion of one’s marriage are exempted. Also, gifts received under Will or as part of the inheritance are exempted beyond the Rs 50,000 limit.
Irritants in Gift Tax
Under Section 56 (2) (V) (VI) (VII-a), the receiver of a gift should pay tax on the amount which is over and above the stipulated taxable limit for a gift. This, though, is an indirect stipulation and it is a major irritant in certain genuine cases. If a poor patient receives gift in excess of the stipulated limit then he or she ends up having to pay tax for the excess amount received. This, apart from being unfair on the receiver’s unfortunate situation and his normal financial standing, also forces helpless people to receive huge gift amounts through cash transactions.
Hope the new Union Budget would address all these irritants and complications in the Tax Laws making it easy on the Tax paying public.