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Home / Money / Personal Finance /  ITR : Disclosure and taxation of gifts received from brother?

My brother had gifted me 5 lakh by account payee cheque last year. Am I required to show this amount while filing my income tax return? If Yes, where to enter this amount in the income tax return form? Secondly, do I need to execute a gift deed for this purpose? If yes, is it necessary to get it registered?

-Tina Desai

By Balwant Jain, tax and investment expert

Under erstwhile Gift Tax Act, abolished long back, the donor was required to pay tax on the gifts made during the year. Now the responsibility to pay tax on gifts has been shifted to the recipient under Section 56(2)(x) of the Income Tax Act.

As per Income Tax Act, the recipient of gift has to include such gits in his income and pay tax in case aggregate of gifts received by him from all the sources during a year exceeds 50,000 in a year. There is no basic exemption but there is no tax liability as long as gifts received are within the threshold of fifty thousand rupees a year.

Certain gifts, however, received from close relatives are outside the scope of this provision and are not treated as income. The relationship of brother and sister is covered under the definition of relatives. So the gift of 5 lakh received from your brother is not income at all and therefore you are not required to disclose it in your income tax return.

Though legally no gift deed is required to be made for this purpose but it is in your own interest to prepare some documentary evidence for future reference. Please collect some document from your brother to prove his regular income, which will help you in proving his ability to give such gift. Also obtain a confirmation from him that he has given you this money as gift containing details like cheque number, date of the cheque and name of the bank. Even if you make a formal gift deed on stamp paper, the same is not required to be registered under the registration law.

(Views as expressed by the expert.)

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