Reader's corner: Are you liable to pay tax on property received as gift?

Topics Tax on gifts

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My father's brother doesn’t have children. He wants to gift a property to my wife or me. Will I need to pay any tax on such a gift received from my uncle? How do I compute the tax?

 

There is no gift tax in India. Further, gifts from close relatives are also not taxable in the hands of recipients. Accordingly, there will be no income-tax liability on you when your uncle transfers the property in your name. It is, however, essential to maintain proper documentation of the gift for record purposes. You may need these details when you sell the property. According to current provisions, you will have to take the cost of acquisition as the cost at which your uncle bought the property to determine your capital gain liability.

 

If the property is gifted by your uncle to your wife, the transaction will not be covered under the exemption. It will be liable to tax in her hands since your uncle does not qualify as a close relative of your wife, according to tax laws. The taxable value of the property will be the stamp duty value. For movable property, the fair market value (FMV) will be considered for taxation purposes.

 

Apart from a full-time job, I have also done some freelance writing assignments in the last financial year. How do I show the income from freelancing? Some of my payment is in cash and some via net banking.

 

The income that you are earning from the freelance assignment will be reported under the head “profits and gains of business or profession”. You need to maintain books of accounts to compute profits to file income-tax return disclosing salary income and profits and gains of business or profession. According to the recently notified income tax return forms for the financial year 2018-19, you need to file ITR 3. In case you are opting for presumptive taxation, then you need to file ITR 4.

 

As a freelancer, you may choose the option of presumptive taxation if you are a resident. That will relieve you from the requirement of maintaining books of accounts and other procedures. In this case, you will need to offer only 8 per cent of the gross receipts as taxable income and will not get any deduction for expenses incurred. The presumptive rate changes to 6 per cent in case receipts are received through banking channels.

 

If you are not opting for presumptive taxation, you can claim a deduction of all the related expenses while calculating taxable income. You will also need to comply with the other requirement of maintaining books and accounts and audit as may be applicable. But, do take care that the tax authorities, while scrutinising your return, may ask for documents and the nature of the expenses claimed by you to substantiate that they were indeed related to the business. You should keep all the bills for future reference.

 

If I get a discount to a club as it has a tie-up with my employer, will it be considered as a perk and taxed?

 

Perquisite is generally looked at as a benefit or emolument flowing from an employer to employee, directly or indirectly. It is in addition to the regular salary or wages paid to the employee. From the limited facts available, it seems your employer is only acting as a negotiator in the transaction, and the company is doing no payment or reimbursement. If this is so, there is no perquisite value since the company is neither making any reimbursement to you for the expense incurred nor making any payment to the club on your behalf.

The writer is partner and leader, personal tax, PwC India. The views expressed are the expert’s own. Send your queries to yourmoney@bsmail.in



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