Definition of Gift Tax
Gift means presentation of something by one person to another without consideration. According to Section 2(8) of the Gift Tax Act, 1990, gift means the transfer by one person to anther of any movable or immovable property voluntarily and without consideration of any money or money’s worth. The value of gift should be the fair market value of the property transferred as determined by the Deputy Commissioner of Taxes and where such value cannot be determined, the rules prescribed in Section 5 of Gift Tax Act, 1990 will be applied.
The legal elements of Gift Tax
Gift means presentation of something by one person to another without consideration. According to Section 2(8) of the Gift Tax Act, 1990, gift means the transfer by one person to anther of any movable or immovable property voluntarily and without consideration of any money or money’s worth. The value of gift should be the fair market value of the property transferred as determined by the Deputy Commissioner of Taxes and where such value cannot be determined, the rules prescribed in Section 5 of Gift Tax Act, 1990 will be applied.
The legal elements of Gift Tax
The following legal elements are observed in the Gift Tax
Act, 1990:
i) Transfer
of Property i.e. gift mist be transferred to the beneficiary.
ii) The
transfer must be an existing property.
iii) The
transfer must be voluntarily and without or with inadequate consideration in
money or money’s worth.
iv) Minimum
taxable limit of Gift is Tk, 20,000.
v) Gift
Tax is chargeable on gifts made in income year.
vi) The
deputy commissioner of Taxes will make assessment and determine tax liability.
vii) For
movable gift, property should be transferred physically but for immovable gift,
documentary transfer is affected.
Features
of Gift
By analyzing the definition of gift, the following features
are observed:
1) Transfer of property: To be gift there must
be a transfer of property. Here property refers to the movable and immovable
property. Transfer may also take in the
form of release discharge surrender forfeiture or abandonment of a debt, contract,
actionable claim or any interest in property in favor of others.
2) Involvement of two parties: Gift must be made by
one person to another person. Here person means any individual, Undivided Hindu
family, company, Corporation, Association of persons, etc.
3) Existing property: Gift must be made of an
existing property- either movable or immovable. any future proprietorship or
expected property can not be included in the list of gift items.
4) Voluntary Transfer: Gift should be made
voluntarily. Transfer of property by force or by any undue influence can not be
treated as gift.
5) Without consideration: Transfer of property as
gift should be made without any consideration. If any consideration is received
by the downer from the Donne for transfer of property then it can be treated as
gift up to the value of consideration.
Valuation
of gift
According to section 5 of Gift tax act. 1990 the valuation
of gift for tax purpose is done in the following ways:
1) The value of the property for the gift tax purpose
would be the value that the property is likely to fetch, if sold in the open
market.
2) If the gifted property is not salable, its value
would be as determined according to the
rules prescribed, such as
a) Insurance
policy = Surrendered cash value at times of gift.
b) Share
in the pvt. Company= Intrinsic value attributable to share holding.
c) Share
value/proportionate value of partnership. It will be ascertained as follows:
# Excess of market value of
the assets over liabilities of the firm is to be ascertained.
# Such excess / surplus
value is to be allocated among the partners according to profit
Sharing ratio
# Share of above surplus
plus capital provided by the partners would be the value of interest of each
partners.
d) Value determined by the national
board of revenue for any other gifts which are not salable in the open
market.
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