Section 56

Section 56(2)(x)

Section 56(2)(x) – Income Tax

The Finance Act, 2017 introduced a new clause (x) in Section 56(2) of the Income Tax Act to provide that receipt of the sum of money or the property received by a person without any consideration or upon crossing a particular threshold would be liable to tax in the hands of the receiver under the head ‘Income from other sources’. The taxation on gifts that are received by an Individual/ HUF is governed by the provisions of clause (x) in Section 56(2) of the Income Tax Act. Let us look in detail about Section 56(2)(x) in this article.

Applicability of Section 56(2)(x)

Under the existing provision of section 56(2)(vii), any sum of money or any property received without any consideration by any Individuals or HUF is chargeable to income tax. Section 56(2)(vii a) was applicable only to the Firm and Closely held company. Whereas, 56(2)(x) is applicable to all kinds of the assessee. Clause(x) is included in section 56(2) to provide the following receipts:

  • Any sum of money that is received without consideration, in aggregate exceeding Rs.50,000 during the financial year
  • Any immovable property without any consideration, the stamp duty value of which exceeds Rs.50,000
  • Any immovable property with the consideration which is less than stamp duty value by an amount exceeding Rs.50,000
  • Any movable property (as defined and specified) without consideration where aggregate fair market value whereof exceeds Rs.50,000
  • Any movable property (as defined and specified) for consideration which is less than fair market value by an amount exceeding Rs.50,000

Features of Section 56(2)(x)

  • The receipts that are provided for any sum of money or immovable property or movable property that is exceeding the threshold limit of 50,000 are taxable.
  • The amount that is liable to tax would be as follows:
Item receivedThreshold limit up to which not taxableAmount liable to tax
Sum of money without considerationIf such sums of money received during the previous year in question do not exceed Rs.50000 in the aggregateIf the threshold of Rs.50,000 exceeded, the entire amount received (and not just the amount in excess of Rs.50000) is liable to tax
Immovable property received without considerationStamp duty value does not exceed Rs.50000Stamp duty value of property received (If stamp duty value of the property received that exceeds Rs.50,000)
Immovable property received for the consideration that is less than stamp duty valueDifference between stamp duty value and consideration does not exceed Rs.50000The entire difference between SDV and consideration (if the difference exceeds 50000)
Movable property received without considerationThe aggregate FMV of movable property received during the financial year does not exceed Rs.50000If the threshold of 50,000 exceeded, entire aggregate FMV(and not just the amount in excess of Rs.50000) is liable to tax
Movable property received for consideration that is less than their FMVDifference between aggregate FMV and consideration does not exceed Rs.50000If the threshold of Rs.50,000 exceeded, then the entire difference is taxable and not just the difference in excess of Rs.50000

Exceptions to Section 56(2)(x)

Provision of 56(2)(x) would not apply to any sum of money or any property received from any relative –

In the case of an individual

  • spouse of the individual
  • Brother or sister of the individual
  • Any inherent ascendant or descendant of the individual
  • Brother or sister of the parents of the individual
  • Any inherent ascendant or descendant of the individual
  • Brother/ sister of the spouse of the individual.
  • Any inherent ascendant or descendant of the spouse of the individual.

In case of a Hindu undivided family

  • Any member thereof

Provision of 56(2)(x) would not be applicable to any sum of money or any property that is received under the following circumstances:

  • On the occasion of an individual’s marriage
  • By a will or by way of inheritance
  • In the case of death of the payer or donor, as the case may be
  • From any local authority that as defined in the Explanation to clause (20) of section 10
  • From any fund/ foundation/ other educational institution/ university/ hospital/ other medical institution/ any trust or institution referred to in under section 10
  • From any trust or institution that is registered under section 12A or section 12AA
  • By any trust or fund or any institution or university or other educational institution or hospital or any other medical institution referred to in sub-clause (iv)/ (v)/ (vi) or sub-clause (via) of clause (23C) of section 10
  • From any individual by a trust created solely for the benefit of relative of the individual.

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