Gift of Immovable Property or any other property
By R.V. Shah, CA
Section 56(2)(vii) of the Income Tax Act, 1961 applicable from 1st October 2009 has inserted this provision and made in case the property received by an individual or Hindu Undivided Family (HUF).
The Section states that, where immovable property or any other property is received without consideration (by way of Gift), the stamp value of which exceeds, Rs 50,000 in case of immovable property, and exceeds the fair market value in case of any other property; such property would be taxable as Income from Other Sources.
Where immovable property or any other property is received by an individual or HUF for a consideration less than stamp value in case of immovable property and fair market value in case of any other property by an amount exceeding Rs 50,000, the stamp duty value/fair market value reduced by the consideration received would be taxable as income from other sources.
The above provisions are not applicable where property is received by a partnership firm, company or any other person other than an individual and HUF.
The question may arise when the transfer takes place.
Section 2(4) of the IT Act states –
“Transfer” in relation to a Capital Asset, include:
Any transaction involving the allowing of possession of any immovable property to be taken or retained in part performance of a Contract of the nature referred to in section 53A of the Transfer of Property Act, 1882.
It is important to note that new provisions are applicable to immovable property or any other property received on or after 1st October 2009. It implies that whatever properties purchased / or possession is received before 1st October 2009 will not be affected.
As far as the word “received” in this section is concerned, there can be no difficulty; it conveys a clear and definite meaning. It means it reaches the recipient and the said property is vested in the hands of the recipient. In other words, it means signing the agreement, paying the consideration and taking possession. It does not mean that the date of receipt of immovable property means date of its registration.
What is the applicability of Section 56 status if an individual transfers movable property to his relative?
Good Article.
This is not entirely correct. What is included in ‘income from other sources’ is not the value of the property but the stamp duty value of the property. Furthermore the clause will not apply where the money or property is received from any relative, on the occasion of marraige of the individual, under a will or inheritance, etc.