Look A Gift Horse In The Mouth

The law governing our taxes appears to be a bottomless pit, especially when you realise that even after you pay your income tax, you are not permitted to gift anybody an amount beyond a mere Rs 30,000 in one financial year. So even if you gift a penny more you come under the scrutiny of the taxman and have to shell out additional gift tax at the rate of 30 per cent, the rate at which you pay your income-tax. This limit is in effect since 1994-95.

However, you are free to divide this tax-free Rs 30,000 among as many persons as you desire. Moreover, the limit being for each fiscal year, you can gift up to Rs 30,000 in say, February, 1998 and follow it up with another Rs 30,000 after April 1, 1998.

 

According to Ravindra Joglekar, a Mumbai-based tax consultant, The gift tax has not been introduced by the government for revenue generation. It only exists to restrict people from using the concept of gift as a means of bypassing the payment of their tax dues. However, Delhi-based Ashish Somani, managing director, Somani Swiss Industries Limited differs, If one is gifting ones own hard-earned white money voluntarily, why should you be restricted by imposition of such heavy taxes? You end up paying almost double the tax on the same money which is very unfair.

The Gift Tax Act, 1958 indeed has contradictory aspects has to it. On the one hand, it allows you to voluntarily gift or transfer any movable or immovable property you own to your friends, relatives, or unknown people, at any point of time even when there is no occasion to celebrate. It even includes transfer of deemed gifts, that is gifting a property to someone at a highly inadequate cost.

On the other hand, the law trumps up many restrictions that often border on the maverick and illogical. For instance, you cannot make a gift of even one rupee to your spouse without getting the income from that clubbed to your income for taxation purposes. Subhash Lakhotia, a Delhi-based tax consultant, calls it unfair and illogical and in the same breath highlights that for as long as you are engaged to be married, you can gift up to Rs 30,000 to your fianc