Results 1 to 1 of 1

Thread: TAXABILITY UNDER INCOME FROM OTHER SOURCES UNDER SECTION 56(2) (Viia)

  1. #1
    Senior Member
    Join Date
    Mar 2010
    Posts
    374
    Blog Entries
    15

    Default TAXABILITY UNDER INCOME FROM OTHER SOURCES UNDER SECTION 56(2) (Viia)

    TAXABILITY UNDER INCOME FROM OTHER SOURCES UNDER SECTION 56(2) (Viia)


    HISTORY OF GIFTS

    Gift tax was introduced in India in the year 1958 and continued for more than 40 years. It was by the Finance (No.2) Act, 1998 that the Gift Tax Act was Abolished.

    The Finance Minister in the course of his budget speech stated that the collection of gift tax was insignificant. It was also conceded that Gift Tax Act had not been successful as an instrument to curb tax evasion and avoidance. As a result Gift Tax was abolished.

    At the same time, to ensure that there are no leakages of income tax revenue through the mechanism of gifts, the Income Tax Act was proposed to be amended to tax gifts as income in the hands of the recipient.

    Therefore the then Finance Minister had by finance (No.2) Act,1998 made a proposal to tax the properties – movable or immovable - without consideration in money or monies worth as income on or after 01.10.1998 in the hands of the recipient. However, as a result of representations received, the proposal to tax gifts as income was dropped.

    The Finance (No.2) Act, 2004 converted to reality the aborted attempt of 1998. In the course of the presentation of the Budget Speech of 2004, the Finance Minister stated that "the objective of amendment is to prevent money laundering. Purported gifts from unrelated persons are therefore to be taxed as income".


    The amendment as ultimately effected does not specifically refer to gifts but refers to any sum received without consideration from any person. The amendment was by insertion of clause (vi) to section 56(2) and a corresponding reference in section 2(24) defining 'income'.

    A new clause (clause vi) was inserted by the Taxation laws (Amendment) Act, 2006 to be operative from April 1, 2007. Gifts received on or after April 1, 2007 were to be taxed under the new provision. Clause (vi) was operative up to October 1, 2009.

    The Finance (No.2) Act, 2009 made this clause inoperative in respect of gifts received on or after October 1 2009. A new clause (vii) was inserted to tax gifts received by on Individual or Hindu Undivided Family (HUF) on or after October 1, 2009.



    Source - NIRC OF ICAI
    Attached Files Attached Files
    Last edited by Bank Audit; 21-08-2010 at 01:15 PM.

Tags for this Thread

Bookmarks

Posting Permissions

  • Register / Login to post new threads
  • Register / Login to post replies
  • Register / Login to post attachments
  • You may not edit your posts
  •