MUMBAI: In a significant judgment, the Income Tax Appellate Tribunal (ITAT) in Mumbai has held that a gift of Rs 20 lakh received by a taxpayer from his brother living in the United Arab Emirates is not subject to tax.
This judgment underlines that Indian tax law exempts certain gifts from tax, especially those given by close relatives.
Under the Income Tax Act, gifts exceeding Rs 50,000 are generally taxed as “income from other sources” at the applicable rate of tax for the recipient.
However, there are some exceptions: gifts from relatives, on the occasion of a marriage or through a will or inheritance are not taxed.
Under Section 56(2)(x) of the IT Act, gifts from a brother fall under the category of exceptions.
The case involved A Salam, who received the generous gift from his brother. However, the income tax officer initially classified the gift as taxable income.
The Income tax The Appeals Commissioner supported this decision on the grounds that the taxpayer could not convincingly prove the creditworthiness of the donor and the authenticity of the gift. Consequently,
A Salam appealed before the ITAT.
In his defense, the gift recipient, A Salam, presented conclusive evidence that his brother, a long-time resident of Dubai who had been doing business there for over 25 years, had made the gift out of “natural love and affection.”
He said that his brother then transferred the amount in three cheques from Bank of Baroda and ICICI Bank.
He also presented his brother’s bank statements, passport and investor visa to prove his identity and financial capacity.
To substantiate the legality of the donation that has now been made, a deed of donation dated August 26, 2022 was also presented.
ITAT member Prashant Maharishi, who presided over the case, not only noted the evidence presented but also noted that the names of the parents of the donor and the recipient matched.
This made it clear that the two men are real brothers. Maharishi also concluded that the Rs 20 lakh received from A Salam should not be treated as taxable income and instructed the tax officer to delete the addition made.
This judgment underlines that Indian tax law exempts certain gifts from tax, especially those given by close relatives.
Under the Income Tax Act, gifts exceeding Rs 50,000 are generally taxed as “income from other sources” at the applicable rate of tax for the recipient.
However, there are some exceptions: gifts from relatives, on the occasion of a marriage or through a will or inheritance are not taxed.
Under Section 56(2)(x) of the IT Act, gifts from a brother fall under the category of exceptions.
The case involved A Salam, who received the generous gift from his brother. However, the income tax officer initially classified the gift as taxable income.
The Income tax The Appeals Commissioner supported this decision on the grounds that the taxpayer could not convincingly prove the creditworthiness of the donor and the authenticity of the gift. Consequently,
A Salam appealed before the ITAT.
In his defense, the gift recipient, A Salam, presented conclusive evidence that his brother, a long-time resident of Dubai who had been doing business there for over 25 years, had made the gift out of “natural love and affection.”
He said that his brother then transferred the amount in three cheques from Bank of Baroda and ICICI Bank.
He also presented his brother’s bank statements, passport and investor visa to prove his identity and financial capacity.
To substantiate the legality of the donation that has now been made, a deed of donation dated August 26, 2022 was also presented.
ITAT member Prashant Maharishi, who presided over the case, not only noted the evidence presented but also noted that the names of the parents of the donor and the recipient matched.
This made it clear that the two men are real brothers. Maharishi also concluded that the Rs 20 lakh received from A Salam should not be treated as taxable income and instructed the tax officer to delete the addition made.
