What is Section 52(2)(x) of Income Tax? Explained
- Posted By SuperCA
- On 09 August
Under Section 56 (2) of the income tax act a new clause X was introduced by the finance act 2017. This new clause stated that if an individual receives a sum of money or property without any consideration or above a certain threshold, then it will be liable for taxation under the head income from other sources by the receiver.
Clause (x) of Section 56 (2) of the Income Tax Act is responsible for governing the taxation on the gifts which are received by individuals and HUFs. In this blog, we will discuss section 56(2)(X) of the Income Tax Act.
Applicability
According to the prevailing clause (VII) of Section 56(2)of the income tax act, an amount of money or property which is received by an individual or an HUF without any consideration will be taxed. But, under this provision only firms and closely held companies were included whereas under provision of Section 56(2)(X),all kinds of assessees are included.
The following receipts are provided under Section 56 (2)(x) of Income Tax Act:
- Any amount of money which is received without consideration in total exceeds Rs. 50000 during the financial year.
- In case of any immovable property received without consideration and the value of stamp duty on it is more than Rs. 50000.
- Any immovable property received with consideration which is smaller than the value of stamp duty by a sum more than Rs. 50000.
- Any movable property received without consideration and the total market value is more than Rs. 50000.
- Any movable property received for concentration which is less than the true market worth by a sum of money more than Rs. 50000.
Features
Under Section 56(2)(x), any receipt that is given for a sum of money or immovable or movable property which is more than the threshold limit of Rs. 50000 liable for taxation. The amounts that are liable for taxation are given below:
|
Item received |
Threshold limit |
Amount liable to tax |
|
Received Amount of money without consideration |
If the sum of money received in the previous is not more than Rs. 50,000 in total |
If the received money is more than Rs.50,000, then the whole received amount will be taxed. |
|
Received Immovable property without consideration |
Value of Stamp duty is less than Rs. 50000 |
Value of Stamp duty of received property is more than Rs. 50,000 |
|
Received Immovable property with consideration that is less than the value of stamp duty |
Difference between value of stamp duty and consideration is less than Rs.50000 |
The entire difference between value of stamp duty and consideration is more than Rs. 50,000 |
|
Received Movable property without consideration |
The total FMV of the received movable property during the financial year is not more than Rs.50000 |
If the FMV is more than Rs. 50,000, then the total FMV is liable for taxation |
|
Received Movable property with consideration less than their FMV |
Difference between total FMV and consideration is less than Rs.50000 |
If the threshold limit of Rs.50,000 is crossed, then the whole difference will be taxed. |
Exceptions
The provisions of Section 56(2)(x) of the Income Tax Act do not apply to any sum of money or property which an individual receives from a relative.
For an individual the relative could be:
- Spouse
- Sibling of the individual
- Any inherent ascendant or descendant
- Sibling of the parents of the individual
- Sibling of the spouse of the individual
- Any inherent ascendant or descendant of the spouse
For a Hindu undivided family
- Any member of the family
The provisions of Section 56(2)(x) will not be applicable to a sum of money or property which is received under the conditions listed below:
- On the individual's marriage
- By inheritance or by a will
- Due to the death of the payer or the donor
- From a trust that is registered under section 12A or 12AA
- From an individual by a trust which is created only to benefit the relatives of the individual
- From any local authority defined in class 20 of section 10
- From any fund or foundation or university or hospital or any trust or institution which is mentioned under section 10
- By any trust or institution or university or fund or hospital which is mentioned in the sub-clause (IV) or (V) or (VI) of section 10(23C).
Conclusion
In this blog, we discussed Section 56(2)(x), its applicability and its features. We also discussed the various exceptions to Section 56(2)(x).
