MUMBAI: In a significant ruling, the Income-Tax Appellate Tribunal’s (ITAT) Mumbai bench has held that a gift of Rs 20 lakh received by a taxpayer from his non-resident brother, based in the UAE, is not subject to tax.
This judgement underscores that Indian tax laws exempt certain gifts from being taxed, particularly those received from close relatives.
Under the Income-Tax Act, gifts exceeding Rs 50,000 are generally taxed as ‘income from other sources’ at the applicable slab rate, in the hands of the recipient.
However, there are several exemptions that do exist: Gifts received from relatives, on the occasion of marriage, or through a will or inheritance are not taxed.
Under the Section 56 (2)(x) of the I-T Act, gifts from a brother fall under the exempted category.
The case involved A Salam, who received the substantial gift from his brother. However, the income-tax (I-T) officer initially classified the gift as taxable income.
The income tax commissioner of appeals supported this decision, arguing on the ground that the taxpayer failed to convincingly prove the donor’s creditworthiness and the genuineness of the gift. Consequently,
A Salam filed an appeal with the ITAT.
In his defence, recipient of the gift A Salam provided complete evidence that his brother, a long-term resident of Dubai who was engaged in business there for over 25 years, made the gift out of ‘natural love and affection’.
He said that the amount by his brother was then transferred through three cheques from the Bank of Baroda and ICICI Bank.
He also submitted his brother’s bank statements, passport, and investor class visa to establish his identity and financial capacity.
A gift deed dated August 26, 2022, was also provided to support the legitimacy of the gift that had been given now.
ITAT member Prashant Maharishi, who presided over the case, in addition to taking cognisance of the evidence produced, also noted that the parental names of the donor and recipient matched.
This clearly established that the two men are real brothers. Maharishi also concluded that the Rs 20 lakh received by A Salam should not be classified as a taxable income and directed the income tax official to delete the addition made.
This judgement underscores that Indian tax laws exempt certain gifts from being taxed, particularly those received from close relatives.
Under the Income-Tax Act, gifts exceeding Rs 50,000 are generally taxed as ‘income from other sources’ at the applicable slab rate, in the hands of the recipient.
However, there are several exemptions that do exist: Gifts received from relatives, on the occasion of marriage, or through a will or inheritance are not taxed.
Under the Section 56 (2)(x) of the I-T Act, gifts from a brother fall under the exempted category.
The case involved A Salam, who received the substantial gift from his brother. However, the income-tax (I-T) officer initially classified the gift as taxable income.
The income tax commissioner of appeals supported this decision, arguing on the ground that the taxpayer failed to convincingly prove the donor’s creditworthiness and the genuineness of the gift. Consequently,
A Salam filed an appeal with the ITAT.
In his defence, recipient of the gift A Salam provided complete evidence that his brother, a long-term resident of Dubai who was engaged in business there for over 25 years, made the gift out of ‘natural love and affection’.
He said that the amount by his brother was then transferred through three cheques from the Bank of Baroda and ICICI Bank.
He also submitted his brother’s bank statements, passport, and investor class visa to establish his identity and financial capacity.
A gift deed dated August 26, 2022, was also provided to support the legitimacy of the gift that had been given now.
ITAT member Prashant Maharishi, who presided over the case, in addition to taking cognisance of the evidence produced, also noted that the parental names of the donor and recipient matched.
This clearly established that the two men are real brothers. Maharishi also concluded that the Rs 20 lakh received by A Salam should not be classified as a taxable income and directed the income tax official to delete the addition made.
