Tax on gifts

There was the famous case of Sachin Tendulakr receiving Ferrari as a gift and refusing to pay tax...If celebrities can kick up a fuss inspite of having enough money , one can understand the plight of a common working man. In Sachin's case the tax was paid by whoever gifted the car to him, but for the rest of us sometimes these gifts may seem like a burden..

@Rambabu It is so kind of you! All my pleasure! @Usha Sachin's case involved not any provision of I.T.Act.He sought waiver of Customs Duty which is steeply high in relation to imported cars and other luxury goods.

Thank you Chinmoy. The way in which you clarified the nuances of Taxation made me see the things in a clear and true perspective.

chinmoymukherjee wrote:@Rambabu It is so kind of you! All my pleasure! @Usha Sachin's case involved not any provision of I.T.Act.He sought waiver of Customs Duty which is steeply high in relation to imported cars and other luxury goods.

Yes I stand corrected Chinmoy  thank you :)

@Usha Frankly I did not mean any correction. Rather I am deeply appreciative of your highlighting the predicament of a commoner vis-a-vis honoring tax laws.There are imports which entail Custom Duty many times over the assessable value of the same making a gift proposition backbreakingly costly reducing it to an avoidably onerous one. About I.T.Act I can say it is a potential minefield for all.Even a former CJI of Supreme Court once expressed his helplessness before it. That's interesting,isn't it?

chinmoymukherjee wrote:@Usha Frankly I did not mean any correction. Rather I am deeply appreciative of your highlighting the predicament of a commoner vis-a-vis honoring tax laws.There are imports which entail Custom Duty many times over the assessable value of the same making a gift proposition backbreakingly costly reducing it to an avoidably onerous one. About I.T.Act I can say it is a potential minefield for all.Even a former CJI of Supreme Court once expressed his helplessness before it. That's interesting,isn't it?

But does not a gift received from abroad have the same rule as gifts received here ? Apart from that ,now with stricter laws with the IT dept  asking all those who have stashed away black money and those owning properties abroad to declare the same and legalise it,any gift recd from abroad would have to come under the IT rules..doesnt it ?

usha manohar wrote:

chinmoymukherjee wrote:@Usha Frankly I did not mean any correction. Rather I am deeply appreciative of your highlighting the predicament of a commoner vis-a-vis honoring tax laws.There are imports which entail Custom Duty many times over the assessable value of the same making a gift proposition backbreakingly costly reducing it to an avoidably onerous one. About I.T.Act I can say it is a potential minefield for all.Even a former CJI of Supreme Court once expressed his helplessness before it. That's interesting,isn't it?

But does not a gift received from abroad have the same rule as gifts received here ? Apart from that ,now with stricter laws with the IT dept  asking all those who have stashed away black money and those owning properties abroad to declare the same and legalise it,any gift recd from abroad would have to come under the IT rules..doesnt it ?

 

Income Tax rules are same. But customs duty is additional burden when yoi import something- be this purchase or gift.  Obviously import duty is not involved when you procure something inland- purchase of gift. 

 

@Usha Cash gifts up to 50000 rupees is exempt It should be out of love and natural affection from relatives.In the case of NON-CASH Customs Duty has to be paid.Immovable property in foreign land as gift is governed by FEMA and other applicable acts.

The import duties are not many times than assessable values as @Chinmoy suggests. Since 1991-92 these are at the most 30% of assessable value at the entry points. Thus for a Value of Rs 1000 the custom duty will be maximum Rs 300. The lower import duties is one reason why International trade n India has expanded considerably since 1991-92. So even if one has to pay 30% tax he is still getting it at 70% discount !!!

@Vijay

In your wild fury to prove me wrong you are wrong

again.First acquaint yourself with import duty and

Customs duty! 

I thought both are interchangeable terms. If I am wrong kindly educate me. I have no desire to prove you wrong, what will I gain by doing so. I only presented facts to set things straight as import or Customs duties have come down significantly after 1991-92 and they do not result in a imported goods costing many times over as was indicated by you. Pl let me know the diff between the two duties.Thanks.

@Vijay I don't look upon myself in the role of an educator. I learn from everyone including you. I broadly agree with you that following our membership with WTO ,the trend is definitely towards lower tariff as our obligations for breaking tariff barrier and there is no flat tariff rate for all HSN item of 30% as you maintain. For instance rate for luxury cars continues to be prohibitive in the range of more than 150% as far as I know. Gulshanji may throw greater light as Indirect Tax is his domain of expertise.

I said highest rate is 30% and not a flat rate. Different items attract different duties. There can be a few exceptions like the one you have stated and let us see what Gulshanji has to say in the matter. 

@Vijay It is the highest rate of which duty? An import attracts several duties like BCD,CVD,ACVD etc. I have named luxury items and accordingly I felt that acceptance of such as gifts would be onerous. In what way am I wrong?

.Import duty is levied on imported goods at specified rates and it forms the landed price at the port of entry'. The other duties are loaded to make the  price of imported  product at par to a large extent with prevailing prices of similar goods of Indian origin to have a level playing field, so that Indian producers are not disadvantaged. Thus CVD can be said to be equivalent to Excise Duty, SAD can be said to be equivalent to VAT etc. My contention was that the import duty is now maximum at 30% of C&F price which you said was very high to make imported products cost many times over. The very high import duty is applicable to only a handful of products. The thread was on taxation of gifts which normally attarct 30% but if they are in the class which attracts very high duty then it will attract that duty.

vijay wrote:

.Import duty is levied on imported goods at specified rates and it forms the landed price at the port of entry'. The other duties are loaded to make the  price of imported  product at par to a large extent with prevailing prices of similar goods of Indian origin to have a level playing field, so that Indian producers are not disadvantaged. Thus CVD can be said to be equivalent to Excise Duty, SAD can be said to be equivalent to VAT etc. My contention was that the import duty is now maximum at 30% of C&F price which you said was very high to make imported products cost many times over. The very high import duty is applicable to only a handful of products. The thread was on taxation of gifts which normally attarct 30% but if they are in the class which attracts very high duty then it will attract that duty.

 

Actually, the thread related only to domestic gift attracting only income tax. The rates are 10%, 20% and 30%.  Customs duty will be involved only on imports.  Here we are making general discussion only. If somebody feels that the gift is taxed too much and he gains nothing, he can well discard the gift. Incidentally, some times, many try to evade the duty/ tax and they are also subject to penalty and/ or confiscation of goods. In such cases, mostly the goods involved are discarded.   

 

Gulshan Kumar Ajmani wrote:

vijay wrote:

.Import duty is levied on imported goods at specified rates and it forms the landed price at the port of entry'. The other duties are loaded to make the  price of imported  product at par to a large extent with prevailing prices of similar goods of Indian origin to have a level playing field, so that Indian producers are not disadvantaged. Thus CVD can be said to be equivalent to Excise Duty, SAD can be said to be equivalent to VAT etc. My contention was that the import duty is now maximum at 30% of C&F price which you said was very high to make imported products cost many times over. The very high import duty is applicable to only a handful of products. The thread was on taxation of gifts which normally attarct 30% but if they are in the class which attracts very high duty then it will attract that duty.

 

Actually, the thread related only to domestic gift attracting only income tax. The rates are 10%, 20% and 30%.  Customs duty will be involved only on imports.  Here we are making general discussion only. If somebody feels that the gift is taxed too much and he gains nothing, he can well discard the gift. Incidentally, some times, many try to evade the duty/ tax and they are also subject to penalty and/ or confiscation of goods. In such cases, mostly the goods involved are discarded.   

 

An excellent clarification sir. You could make me understand the nuances of Taxation which was Greek and Latin to me all along.