Gift Tax On Immovable Property in India 2024

The immovable property provided to an individual without consideration is termed as a gift of immovable property. And the tax payable for this kind of property is examined based on the applicable Income Tax Acts. Read this article to learn about gift tax on immovable property and its calculation.

Tax on the gift of Immovable property without consideration

If the below-mentioned conditions are agreed then immovable property provided without consideration by the person or Hindu Undivided Family (HUF) will need to pay the tax

1. Immovable property is provided to an individual or HUF. Whereas, Immovable properties are building or land, or both.
2. Such immovable property is counted as a capital asset of an individual or HUF within Section 2 (14).
3. Such without considered immovable property’s stamp duty value should exceed Rs. 50,000.

Exemptions of gift tax on immovable property without consideration

The below-listed cases of immovable property gifts will not be considered under the tax slab.

Immovable property received from relatives like

• Individual

1. Spouse of the person
2. Brother or sister of the person
3. Spouse’s Brother or sister of the person
4. Parent’s Brother or sister of the person.
5. Recipient‘s lineal ascendant or descendent (If any)
6. Spouse’s lineal ascendant or descendent of the person(If any)
7. Spouse of the individuals referred in (b) to (f)

• HUF

1. The property is provided as a gift on the marriage of the recipient. Other than marriage, none of the occasions will be considered for the non-tax payable slab.
2. The property is accepted under a will or by way of inheritance
3. The property was given after the death of the donor.
4. The property is provided by the local authority. 
5. The property is provided by any fund, university, foundation, related educational institution, medical institution, trust, or institution mentioned in section 10(23C).
6. The property is provided by an institution or trust mentioned under sections 12AA, or 12AB.

Income Tax on the gift of Immovable Property by Friend

As friends don’t come under the relative section, the immovable property provided by friends will come under tax paying slab.

Gift Tax on Immovable Property located Abroad

If the above-mentioned conditions are satisfied then the gift of immovable property will come under the tax-paying slab even being the property is based in India or abroad.

Gift Tax On Immovable Property Calculation of without consideration

Mr. Suresh gifted a house to his friend Mr. Ajay. The market value of the house is Rs. 8,40,000 and the building value added by the stamp valuation authority for stamp duty charges purposes was Rs. 9,00,000. What is the tax implication for this house?

Ans:

Here, this building is a capital asset for Mr. Ajay. He received this building from his friend. Whereas, a friend doesn’t come under the definition of relative. The property was also not gifted on any specific occasion. So, this property will come under tax paying slab.

So, The property’s stamp duty value also exceeds Rs. 50,000. Hence, The property’s stamp duty value i.e. Rs 900000 will come under a tax-paying slab for Mr. Ajay.

The tax will be charged under the slab “Income from other sources”.

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Tax on Immovable property received of less than its stamp duty value

If the below-mentioned conditions are satisfied then the immovable property is provided to a person or HUF for less than the property’s stamp duty value will come under the tax-paying slab.

1. Immovable property is owned by an individual or a HUF.
2. Such immovable property will be considered a ‘capital asset’ of the person or HUF under section 2(14) of the Act.
3. Such immovable property is owned for consideration. And the consideration is less than the stamp duty value & the difference is higher than Rs. 50000 and 5 percent of consideration.

Whereas, The Finance Act, 2020 specifies that the safe harbor limit will be 5 percent to 10 percent from the assessment year 2021-22.

Gift tax Exemptions on immovable property of less than its stamp duty value

The below-listed cases of immovable property provided over less than its stamp duty value will not be considered under the tax-paying slab.

Immovable property received from relatives.

Whereas, relatives in this case will be

• Individual

1. Spouse of the person
2. Brother or sister of the person
3. Spouse’s Brother or sister of the person
4. Parent’s Brother or sister of the person.
5. Recipient‘s lineal ascendant or descendent (If any)
6. Spouse’s lineal ascendant or descendent of the person (If any)
7. Spouse of the individuals referred in (b) to (f)

• HUF

1. The property is provided as a gift for the marriage of the person.
2. The property is provided under a will or by way of inheritance
3. The property was given after the death of the donor.
4. The property is provided by the local authority. 
5. The property is provided by any fund, university, foundation, related educational institution, medical institution, trust, or institution mentioned in section 10(23C).
6. The property is provided by an institution or trust mentioned under sections 12A, 12AA, or 12AB.
7. The property is provided by any trust/fund/university/hospital/medical institution or educational institution mentioned in section 10(23C – iv, v, vi, via). 
8. The property is provided as a transaction rather than a transfer under section 47 (viiac, viiad, viiae, viiaf).

Gift Tax On Immovable Property Calculation of less than its stamp duty value

Mr. Sachin bought a building from Mr. Avinash for Rs. 25,20,000. The building value considered by the Stamp Valuation Authority for applying stamp duty was Rs. 28,00,000. What is the tax implication for this property?

Ans.

If a person bought an immovable property as a capital asset. The stamp duty value of such kind of property surpasses the actual consideration of Rs 50,000 and 10 percent of the actual consideration. Then the surplus of stamp duty value over the bought rate will be concluded and charged to tax to the purchaser.

The building is a capital asset for Mr. Avinash. The stamp duty value of this property surpassed the actual consideration by Rs. 2,80,000. As it is higher than Rs. 50,000 and 10 percent of the actual consideration of Rs. 25,20,000 which is Rs. 2,52,000.

So, after considering all the Income tax conditions, (Rs. 28,00,000 – Rs. 25,20,000) Rs. 2,80,000 will be considered as income of Mr. Avinash.

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