Tax matters: Uncle's gift is tax free

Q  If I receive a non-agricultural land from my uncle (mother’s brother) as a gift, what is my tax liability? My uncle wants to gift the land either to me or my mother. Today the market value of this land is around Rs 15 lakh. If I accept this gift, will its market value be included in my taxable income for the financial year 2018-19? Or is it better to ask my mother to accept the land as the gift because she has no taxable income? Kindly also clarify if registration in case of gift is mandatory?
Swapna Shah
Via email

A) Section 56(2)(vii) of the Income Tax Act provides that money or movable property worth or immovable property received without consideration or for inadequate consideration is chargeable to income-tax in the assessment of the recipient (i.e. donee) under the head “Income from other sources” if such money is received in the previous year.  

I) Gift received on or after October 1, 2009
Money or movable property immovable property without consideration or for inadequate consideration: Entire value is chargeable as income-tax, if such gift is worth more than Rs 50,000 or the value of stamp duty exceeds Rs 50,000 in case of immovable property.

II) Gift received after AY 2014-15
1) Any immovable property being land or building or both:
The difference between the stamp value of such property and such consideration will be income in the hands of the recipient (i.e., donee), if stamp duty is exceeds Rs 50,000 (inadequate consideration).

2) Any property other than immovable property, without consideration (i.e. gift):
The entire aggregate fair market value of such property will be income in the hands of the recipient (i.e.donee) if its aggregate fair market value exceeds Rs 50,000.

3) Any money or movable property for a consideration which is less than the fair market value:
The difference between the fair market value of such property and such consideration will be the income of the recipient, if the fair market is by more than Rs 50,000.

The above provisions, however, will not apply to any sum of money or any property received from any relative or on the occasion of the marriage of the individual or under a will or by way of inheritance; or in contemplation of death of the payer.

The term ‘relative’ for this purpose means: (1) spouse of the individual (2) brother or sister of the individual (3) brother or sister of the spouse of the individual (4) brother or sister of either of the parents of the individual (5) any lineal ascendant or descendant of the individual (6) any lineal ascendant or descendant of the spouse of the individual and (7) spouse of the person referred to in (2) to (6) above.

As your uncle is covered under the definition of ‘relative’ mentioned above, there will be no income-tax liability. You must note that the gift of an immovable property will be complete only on registration of the property in the name of the donee.

Q  I am a senior citizen. I want to buy a Rs 30 lakh insurance policy for my 17-year-old grandson. Will I get the deduction benefit under Section 80C for the contribution made towards this?
Narayan Rao
Via e-mail

A) Under Section 80C, any amount paid by an individual on his/her life or on life of his/her spouse or on the life of any child qualifies for the deduction. Therefore, you will not be eligible to claim the deduction under this section.

(The write is a Hyderabad-based chartered accountant. Please send your queries to info@rathiandmalani.com)