In the hands of Mr. Hari In the hands of Mr. Rajesh
In case Mr. Hari is a share broker and not a property dealer, the building would represent his capital asset and not stock-in-trade. In such a case, the provisions of section 50C would be attracted in the hands of Mr. Hari and ` 75 lakh, being the difference between
the stamp duty value on the date of registration (i.e., ` 150 lakh) and the purchase price (i.e., ` 75
lakh) would be chargeable as short-term capital gains.
It may be noted that under section 50C, there is no option to adopt the stamp duty value on the date of agreement, even if the date of agreement is different from the date of registration and part of the consideration has been received on or before the date of agreement otherwise than by way of cash.
There would be no difference in the taxability in the hands of Mr. Rajesh, whether Mr. Hari is a property dealer or a stock broker.
Therefore, the provisions of section 56(2)(vii) would be attracted in the hands of Mr. Rajesh who has received immovable property, being a capital asset, for inadequate consideration. Therefore, ` 50 lakh, being the difference between the stamp duty value of the property (i.e., ` 140 lakh) and the actual consideration (i.e., ` 90 lakh) would be taxable under section 56(2)(vii) in the hands of Mr. Rajesh.
Example
(i) Mr. X has received three gifts from his three friends (a) `55,000 in cash
(b) Land with market value `5,00,000 but the value for the purpose of charging stamp duty `4,00,000. (c) Jewellery with market value `3,00,000
In this case, taxable amount shall be 55,000 + 4,00,000 + 3,00,000 = 7,55,000
(ii) Mr. Hitesh Kumar has received gift of `50,000 in cash from his friend, in this case it will not be considered to be his income.
(iii) Mr. Vicky Jain has received gift of `1,50,000 in cash from his brother, in this case it will not be considered to be his income.
(iv) Mr. Kamal Sapra has received gift of `1,50,000 in cash from his mother’s sister, in this case it will not be considered to be his income.
(v) Mr. Akash Choudhary has received gift of `1,50,000 in cash from his father’s brother, in this case it will not be considered to be his income.
(vi) Mr. Saket Mittal has received gift of `1,50,000 in cash from his cousin, in this case it will be chargeable to tax.
(vii) Mr. Vikram Bajaj has received gift of `1,50,000 in cash from brother of his spouse, in this case it will not be considered to be his income.
(viii) Mr. Harsh Arora has received gift of `1,50,000 in cash from his grand father, in this case it will not be considered to be his income.
(ix) Mr. Amanpreet Singh has received gift of `1,50,000 in cash from spouse of his brother, in this case it will not be considered to be his income.
(x) Mr. Amit Bhaskar has received gift of `1,50,000 in cash from husband of his sister, in this case it will not be considered to be his income.
(xi) Mr. Sunil Dua has received gift of `1,50,000 in cash from sister of his brother’s wife, in this case it will be considered to be his income.
(xii) Mr. Akhilesh Kumar has received gift of `1,50,000 in cash from the sister of his spouse, in this case it will not be considered to be his income.
(xiii) Mr. Suresh Yadav has received gift of `5,000 in cash on his birthday from each of his eleven friends, in this case it will be considered to be his income because the total amount is exceeding `50,000.
(xiv) Mr. Ram Singh has received gift of `1,50,000 in kind from his friend, in this case it will be considered to be his income.
(xv) Mr. Naresh Kumar has received gift of `1,50,000 in cash from his friend on the occasion of his marriage, in this case it will not be considered to be his income.
(xvi) Mr. Ajay Narula has received gift of `75,000 in cash and `75,000 in kind from his fiancee, in this case gift in cash will be considered to be his income and the gift in kind shall also be considered to be his income.
Gifts to the Employees Section 17(2)(viii) Rule 3(7)(iv)
over it is taxable. If the employer has given any voucher or token in lieu of which such gift may be received, it will also be exempt in the similar manner.
Gifts in cash or gifts convertible into cash i.e. gift cheques etc. shall be fully chargeable to tax. Gifts or Perquisites from Clients Section 28
The value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession.
If any person has received any gift or perquisite or benefit either in cash or in kind from any of his clients, it will be considered to be business receipt and shall be taken into consideration while computing income under the head business/profession.
Example
ABC Ltd. has engaged one Advocate with regard to its legal proceedings. The company has provided him facilities of free travelling, boarding/lodging and has incurred `25,000, it will be considered to be professional receipt of the Advocate.
Scholarship Section 10(16)
Any scholarship received by a person for meeting the cost of education shall be exempt from income tax.
Award/ Reward Section 10(17A)
Any award or reward whether in cash or in kind instituted by the Central Government or the State Government shall be exempt from income tax. Similarly any private award or reward shall be exempt from income tax if approved by the Central Government.
PRACTICE PROBLEMS
TOTAL PROBLEMS 5
Problem 1.
Discuss taxability in the following cases:
(i) Mr. Jeevan Chauhan has received gift of ` 50,000 in cash from his friend. (ii) Mr. Sudhanshu Mittal has received gift of ` 2,50,000 in cash from his brother. (iii) Mr. Vishal Jain has received gift of ` 2,50,000 in cash from his mother’s sister. (iv) Mr. Druv Goel has received gift of ` 2,50,000 in cash from his father’s brother. (v) Mr. Nimit Aggarwal has received gift of ` 2,50,000 in cash from his cousin.
(vi) Mr. Naveen Jain has received gift of ` 2,50,000 in cash from brother of his spouse. (vii) Mr. Sachin Bhatia has received gift of ` 2,50,000 in cash from his grand father. (viii) Mr. Sunny Arora has received gift of ` 2,50,000 in cash from spouse of his brother. (ix) Mr. Ritesh Bansal has received gift of ` 2,50,000 in cash from husband of his sister. (x) Mr. Mohit Singh has received gift of ` 2,50,000 in cash from sister of his brother’s wife. (xi) Mr. Rahul Kumar has received gift of ` 2,50,000 in cash from the sister of his spouse.
(xii) Mr. Hunny Jindal has received gift of `6,000 in cash on his birthday from each of his eleven friends. (xiii) Mr. Satbeer Singh has received gift of ` 2,50,000 in kind from his friend.
(xiv) Mr. Ashok Kumar has received gift of `2,50,000 in cash from his friend on the occasion of his marriage.
(xv) Mr. Mukesh Verma has received gift of `1,00,000 in cash and `1,00,000 in kind from his fiancée.
Problem 2.
Mr. Tarun Gulati submits the particulars for the previous year 2013-14 as given below: 1. He has received a gift of `27,000 from one of his friend on 01.09.2013.
2. He has received a gift of `11,000 on 01.10.2013 from his wife Mrs. Tanya Gulati. 3. He has received a gift of `29,000 from his step daughter on 01.01.2014.
5. He has received a gift of `20,000 in kind from his employer on 01.03.2014. 6. He has received gold as gift from his friend on 01.12.2013 with value `2,00,000. 7. He has received `27,000 as gift from his maternal aunt (mother’s sister) on 10.12.2013. 8. He has received dividend of `2,00,000 from a domestic company on 31.03.2014. 9. He has received two gifts of `30,000 each from his neighbours on 01.06.2013. Compute his tax liability for assessment year 2014-15.
Answer = Tax Liability: `8,450
Problem 3.
Mr. X received gift in cash `3,00,000 from son of his father’s brother and gift of `1,00,000 in cash from brother of father of Mrs. X. He has agricultural income `5,00,000.
Compute his tax liability for Assessment Year 2014-15.
Answer = Tax Liability: `39,140 (b) He is aged 81 years.
Answer = Tax Liability: Nil
(c) He is non-resident and he has completed age of 80 years as on 31.03.2014.
Answer = Tax Liability: `41,200
Problem 4.
Mr. X received jewellery valued `5,00,000 from brother of his grand father and his agricultural income is `1,00,000.
Compute his income and tax liability for Assessment Year 2014-15.
Answer = Total Income: `5,00,000; Tax Liability: `39,140
Problem 5.
Following gifts are received by Mrs. Sweety, who is carrying on jewellery business, during the previous year 2013-14:
(i) On the occasion of her marriage on 07.09.2013, she has received `1,20,000 as gift out of which `85,000 are from relatives and balance from friends.
(ii) On 03.10.2013, she has received cash gift of `2,50,000 from cousin of her mother. (iii) A mobile phone worth `15,000 is gifted by her friend on 21.09.2013.
(iv) She gets a cash gift of `2,40,000 from the elder brother of her husband's grandfather on 10.12.2013. (v) She has received a cash gift of `6,00,000 from her friend on 27.01.2014.
(vi) She has received bullion, the fair market value of which was `4,75,000 on her birthday,19.01.2014. Mrs. Sweety purchased from her friend, who is also carrying jewellery business, jewellery at ` 2,50,000 on 25.01.2014, the fair market value of which was `5,00,000 on that date.
Compute total income and tax liability of Mrs. Sweety for A.Y.2014-15.
Answer = Total Income: `15,65,000; Tax Liability: `3,08,490
SOLUTIONS
TO
PRACTICE PROBLEMS
Solution 1:
(i) Mr. Jeevan Chauhan has received gift of `50,000 in cash from his friend, in this case it will not be considered to be his income.
(ii) Mr. Sudhanshu Mittal has received gift of `2,50,000 in cash from his brother, in this case it will not be considered to be his income.
(iii) Mr. Vishal Jain has received gift of ` 2,50,000 in cash from his mother’s sister, in this case it will not be considered to be his income.
(iv) Mr. Druv Goel has received gift of `2,50,000 in cash from his father’s brother, in this case it will not be considered to be his income.
(v) Mr. Nimit Aggarwal has received gift of `2,50,000 in cash from his cousin, in this case it will be chargeable to tax.
(vi) Mr. Naveen Jain has received gift of `2,50,000 in cash from brother of his spouse, in this case it will not be considered to be his income.
(vii) Mr. Sachin Bhatia has received gift of `2,50,000 in cash from his grand father, in this case it will not be considered to be his income.
(viii) Mr. Sunny Arora has received gift of `2,50,000 in cash from spouse of his brother, in this case it will not be considered to be his income.
(ix) Mr. Ritesh Bansal has received gift of `2,50,000 in cash from husband of his sister, in this case it will not be considered to be his income.
(x) Mr. Mohit Singh has received gift of `2,50,000 in cash from sister of his brother’s wife, in this case it will be considered to be his income.
(xi) Mr. Rahul Kumar has received gift of `2,50,000 in cash from the sister of his spouse, in this case it will not be considered to be his income.
(xii) Mr. Hunny Jindal has received gift of `6,000 in cash on his birthday from each of his eleven friends, in this case it will be considered to be his income because the total amount is exceeding `50,000.
(xiii) Mr. Satbeer Singh has received gift of `2,50,000 in kind from his friend, in this case it will be considered to be his income.
(xiv) Mr. Ashok Kumar has received gift of `2,50,000 in cash from his friend on the occasion of his marriage, in this case it will not be considered to be his income.
(xv) Mr. Mukesh Verma has received gift of `1,00,000 in cash and `1,00,000 in kind from his fiancee, in this case gift in cash will be considered to be his income and the gift in kind shall also be considered to be his income.
Solution 2: `
Computation of income under the head Salary
Gift in kind from his employer (20,000 – 5,000) 15,000.00 Income under the head Salary 15,000.00
Computation of income under the head Other Sources
Gift received from friend 27,000.00 Gifts received from neighbours 60,000.00 Gift received from friend in kind 2,00,000.00 Income under the head Other Sources 2,87,000.00 Gross Total Income 3,02,000.00 Less: Deduction u/s 80C to 80U Nil Total Income 3,02,000.00
Computation of Tax Liability
Tax on `3,02,000 at slab rate 10,200.00 Less: Rebate u/s 87A (10,200 or 2,000) 2,000.00 Tax before education cess 8,200.00 Add: Education cess @ 2% 164.00 Add: SHEC @ 1% 82.00 Tax Liability 8,446.00 Rounded off u/s 288B 8,450.00
Note: Dividend received by Mr. Tarun Gulati from domestic company is exempt u/s 10(34). Solution 3:
`
Computation of income under the head Other Sources
Gift received from son of his father’s brother 3,00,000 Gift received from bother of father’s of Mrs. X 1,00,000 Income under the head Other Sources 4,00,000 Gross Total Income 4,00,000 Less: Deduction u/s 80C to 80U Nil
Total Income 4,00,000
Agricultural Income 5,00,000
Computation of Tax Liability
Step 1. Tax on (agricultural income + non agricultural income)
i.e. Tax on ` 9,00,000/- at slab rates 1,10,000 Step 2. Tax on (`2,00,000 + agricultural income) at slab rates 70,000 Step 3. Deduct Tax at Step 2 from Tax at Step 1 40,000 Less: Rebate u/s 87A (40,000 or 2,000) 2,000 Tax before education cess 38,000 Add: Education cess @ 2% 760 Add: SHEC @ 1% 380 Tax Liability 39,140
Solution 3(b):
Total Income 4,00,000
Agricultural Income 5,00,000
Tax Liability Nil
Note: If non-agricultural income is upto the limit not chargeable to tax (`2,00,000/ 2,50,000/5,00,000), partial integration is not applicable.
Solution 3(c):
Total Income 4,00,000
Agricultural Income 5,00,000
Computation of Tax Liability
Step 1. Tax on (agricultural income + non agricultural income)
i.e. Tax on ` 9,00,000/- at slab rates 1,10,000 Step 2. Tax on (`2,00,000 + agricultural income) at slab rates 70,000 Step 3. Deduct Tax at Step 2 from Tax at Step 1 40,000 Add: Education cess @ 2% 800 Add: SHEC @ 1% 400 Tax Liability 41,200
Note: Rebate under section 87A is not allowed to non-resident. Solution 4:
`
Computation of income under the head Other Sources
Gift in kind from brother of his grand father 5,00,000 Income under the head Other Sources 5,00,000 Gross Total Income 5,00,000 Less: Deduction u/s 80C to 80U Nil
Total Income 5,00,000
Agricultural Income 1,00,000
Computation of Tax Liability
Step 1. Tax on (agricultural income + non agricultural income)
i.e. Tax on ` 6,00,000/- at slab rates 50,000 Step 2. Tax on (`2,00,000 + agricultural income) at slab rates 10,000 Step 3. Deduct Tax at Step 2 from Tax at Step 1 40,000 Less: Rebate u/s 87A (40,000 or 2,000) 2,000 Tax before education cess 38,000 Add: Education cess @ 2% 760 Add: SHEC @ 1% 380 Tax Liability 39,140
Solution 5:
Computation of Total Income of Mrs. Sweety for the A.Y. 2014-15
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