Someone gave me money or property without payment — when is that taxable in my hands?
Section 56(2)(x) taxes the recipient, not the giver, on money or specified property received without consideration or for inadequate consideration, once the Rs 50,000 threshold is crossed. It does not apply at all if the giver is a "relative" as defined, or if the receipt falls in one of the listed exclusions such as marriage, a will, or inheritance.
Section 56(2)(x) applies to receipts on or after 1 April 2017 and covers any person — individual, HUF, firm or company. It has three limbs.
Money is the simplest. If you receive a sum of money without consideration and the aggregate for the year exceeds Rs 50,000, the whole aggregate is taxable, not just the excess. The threshold is a cliff, not an exemption.
Immovable property has two variants. Received without consideration, the stamp duty value is taxable if it exceeds Rs 50,000. Received for inadequate consideration, the excess of stamp duty value over the consideration is taxable only if that excess is more than the higher of Rs 50,000 and 10% of the consideration. So a stamp duty value at 108% of the price is safe; at 120% the whole 20% gap is taxable. There is also a proviso letting you use the stamp duty value on the date of the agreement rather than the date of registration, provided at least part of the consideration was paid by cheque, bank draft, electronic clearing or a prescribed electronic mode on or before the agreement date.
Property other than immovable property is the third limb. "Property" is a closed list of capital assets — shares and securities, jewellery, archaeological collections, drawings, paintings, sculptures, any work of art, bullion, and virtual digital assets. Received without consideration, the aggregate fair market value is taxable if it exceeds Rs 50,000; received for inadequate consideration, the excess of FMV over consideration is taxable if that excess exceeds Rs 50,000. A car, or a mobile phone, is not on the list.
The relative exclusion is the one people use most, and it is a defined term, not an ordinary-language one. For an individual it means the spouse; brother or sister; brother or sister of the spouse; brother or sister of either parent; any lineal ascendant or descendant; any lineal ascendant or descendant of the spouse; and the spouse of any of those persons. Note what is missing: cousins, nephews and nieces, and a friend, are not relatives. For an HUF, any member of the HUF is a relative. Note also that the definition is one-directional in places — your maternal uncle is your relative, but you are not necessarily his under the same clause.
The other exclusions in the provisos are wide. The section does not apply to receipts on the occasion of the individual's marriage, under a will or by way of inheritance, in contemplation of the payer's death, from a local authority under section 10(20), from a fund or institution referred to in section 10(23C), from a trust registered under section 12A, 12AA or 12AB, or on any transaction not regarded as a transfer under the listed clauses of section 47. There are also COVID-era carve-outs for medical treatment reimbursements and for family payments on a COVID death.
A point often missed: the exclusion is for marriage of the individual receiving the gift. A gift on the occasion of a child's marriage, received by the parent, is not covered. And when property is taxed under 56(2)(x), section 49(4) steps the recipient's cost up to the value that was taxed, so the same amount is not taxed again on a later sale.
This is the provision that turns family money movements, property deals below circle rate and unlisted share transfers into income in the recipient's hands, and it applies to companies and firms as well as individuals. Because the Rs 50,000 thresholds are cliffs, being a rupee over changes the taxable amount from nil to the whole receipt. And since the giver has no liability at all, the recipient often does not realise anyone owes tax.
The shares are listed but locked in. Do I value them at the market quotation?
Our family settled a property dispute orally and only filed a memorandum with the authorities. Someone now says the settlement is void because it was never registered. Is it?
I paid the whole price and took possession of a factory under an agreement for sale in December 2016, but the sale deed was only registered in March 2018. Can the department tax the stamp-value difference under section 56(2)(x) in the later year?
The only addition is the gap between the stamp duty value and my price. Can that carry a s.270A penalty?
I bought agricultural land below the jantri rate. Can s.56(2)(x) apply when the land is not even a capital asset?
I bought unquoted shares from family members at Rs 540 when the officer's rule 11UA working says Rs 661. Can a discount for lack of marketability and the company's real position be brought into the valuation?
The Approving Panel held that my client's arrangement is NOT an impermissible avoidance arrangement, but the Assessing Officer has taxed the same transaction under another section anyway. Can he do that?
My client, a farmer, bought agricultural land well below circle rate with his land-acquisition compensation. The officer has added the difference under section 56(2)(vii)(b). Is agricultural land within the charge at all?
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