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Specific Incomes u/s 56(2) – Gifts & Winnings

"Income from Other Sources" isn't just interest. It catches Gifts (if you're lucky to get them) and Winnings (if you're lucky to win them). But the taxman is waiting!

1. Taxation of Gifts (Section 56(2)(x))

Gifts received by any person from any person are taxable if they exceed ₹50,000 in a year.

Three Categories of Gifts:

Category A: Monetary Gifts (Cash/Cheque/Draft)

  • Rule: If aggregate money received > ₹50,000 in a year.
  • Tax: The WHOLE amount is taxable.
  • Example: Received ₹20k from A and ₹35k from B. Total ₹55k.
  • Taxable: ₹55,000 (Not just the excess 5k).

Category B: Immovable Property (Land/Building)

  • Case 1: Associated with No Consideration (Free Gift)
    • If Stamp Duty Value (SDV) > ₹50,000.
    • Taxable: Full SDV.
  • Case 2: Inadequate Consideration (Low Price)
    • If SDV > Consideration + Higher of (₹50k or 10% of Consideration).
    • Taxable: SDV - Consideration.

Category C: Specified Movable Property (Shares, Jewellery, Drawings, Bullion)

  • No Consideration: If Fair Market Value (FMV) > ₹50,000. Taxable: Full FMV.
  • Inadequate Consideration: If FMV - Consideration > ₹50,000. Taxable: Difference.

(Note: Cars/Mobiles/Watches are NOT "Specified Movable Property". Gifts of these are Exempt!)

Exempt Gifts (Proviso to Sec 56(2)(x))

Gifts are FULLY EXEMPT if received from/on:

  1. Relatives (Spouse, Brother, Sister, Parents, Lineal Ascendants/Descendants of self or spouse).
  2. Marriage (On the occasion of marriage of the individual).
  3. Will or Inheritance.
  4. Local Authority / Fund / University.

Example:

  • Gift from Father: Exempt.
  • Gift from Friend on Birthday: Taxable (if >50k).
  • Gift from Friend on Marriage: Exempt.

2. Winnings from Lotteries, Crosswords, Games (Section 115BB)

Includes: Lotteries, Crossword puzzles, Races (Horse race), Card games, Gambling, Betting, and Online Games.

Tax Rate: Flat 30% (+ Cess) = 31.2%

  • No Slab benefit.
  • No Expenditure allowed against this income (Ticket cost not deductible).
  • No Deduction u/s 80C to 80U allowed.
  • Basic Exemption Limit cannot be exhausted against this.

TDS on Winnings (Section 194B / 194BA)

  • Normal Winnings: TDS @ 30% if prize > ₹10,000.
  • Online Games: TDS @ 30% on Net Winnings (Withdrawal/Year-end).

Practical Examples

Example 1: Gifts Mr. Ram received:

  1. Cash from Father: ₹2,00,000 (Relative - Exempt).
  2. Cash from Friend for Marriage: ₹1,00,000 (Marriage - Exempt).
  3. Cash from Friend for Birthday: ₹51,000 (Non-Relative, >50k - Fully Taxable).
  4. Smart Watch from Friend: ₹30,000 (Not specified property - Exempt).

Total Taxable Income: ₹51,000.

Example 2: Immovable Property Bought Flat for ₹40 Lakhs. Stamp Value is ₹60 Lakhs.

  • Difference: ₹20 Lakhs.
  • Difference > 10% of Consideration (4L)? Yes.
  • Taxable Gift: ₹60L - ₹40L = ₹20 Lakhs (Income from Other Sources).

Example 3: Lottery Won Lottery: ₹1,00,000. Ticket Cost: ₹5,000.

  • Income: ₹1,00,000 (Cost not deductible).
  • Tax: 30% of 1L = ₹30,000.
  • (TDS would have been deducted).

Summary

  • Money Gifts: Taxable if aggregate > ₹50,000 from non-relatives.
  • Property Gifts: Taxable if SDV/FMV exceeds consideration by > ₹50,000 (or 10% rules).
  • Relatives: Definition covers spouse, siblings, parents, lineage (but NOT cousins or friends).
  • Occasion: Marriage gifts exempt; Birthday/Anniversary gifts taxable.
  • Winnings: Flat 30% tax. No expense deduction. No slab benefit.

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