When Gifts Become Taxing

The Gift Tax Act of 1958 was abolished in 1998, and with that those givers as well as giftees were no longer required to pay taxes on the gifts. However,  this settlement led to bogus  capital-building and money-laundering cases. Following this, former finance minister P. Chidambaram in the budget of 2004 stated: “I abolished Gift Tax in 1997. That decision remains, but the loophole requires to be plugged to prevent money laundering.” And with that, section 56(2)(v) was introduced under the Finance Act 2004 for taxing gifts in the hands of the receiver. Accordingly, today, any gifts received by an individual or Hindu Undivided Family (HUF) are taxed under the Income Tax Act, unless they fall under the category of  any exemption. Also the gifts, which are not under the exempt category, need to be disclosed in Income Tax Return (ITR) and taxes need to be paid...