GIFT of any property received by an individual or a Hindu Undivided Family ('HUF') after October 1, 2009, in excess of Rs 50,000 is subject to income tax at the hands of the recipient. Property means immovable property being land or building, shares and securities, jewellery, archaeological collections, drawings, paintings, sculptures or any work of art. In order to reduce rigours of this provision and to provide relief in respect of genuine/customary gifts, certain gift transactions are exempt from tax, eg gifts received from a relative or on the occasion of the marriage of the individual or under a will or by way of inheritance or in contemplation of death of the payer etc.

VALUATION RULES

Guidance was provided under the Act in respect of valuation of the immovable property. In respect of property other than immovable assets, it was specified that Fair Market Value ('FMV') of a property shall be determined in accordance with the method, as may be prescribed. These rules have now been prescribed and are effective October 1, 2009. In this context, it has been specified that valuation date would be the date on which the property is received by the tax payer.

JEWELLERY

The FMV of the jewellery shall be estimated to be the price at which such jewellery could be sold in the open market on the valuation date. In this context, the tax payer may obtain the report of the registered valuer with regard to the value of such jewellery. Registered valuer shall be one as prescribed under the Wealth Tax Rules. In case the jewellery received as gift has been purchased on the valuation date from a registered dealer, then the invoice value of such jewellery shall be taken to be the FMV.

PAINTINGS & DRAWINGS

The FMV of archaeological collection, paintings, drawings, sculpture or any other work of art - referred to as 'artistic work' - shall be estimated to be the price at which it could be sold in the open market on the valuation date. The tax payer may obtain the report of the registered valuer in respect of valuation of such property. In case the artistic work received as gift has been purchased on the valuation date from a registered dealer, then the invoice value of the artistic work shall be taken to be the FMV.

QUOTED SHARES AND SECURITIES

If the quoted shares and securities are received by way of a transaction carried out through any recognised stock exchange, the FMV of such shares and securities shall be the transaction value as recorded in such stock exchange. In case such quoted shares and securities are received by way of transaction carried out other than through any recognised stock exchange, the FMV of such shares and securities shall be the lowest price of such shares and securities quoted on any recognised stock exchange on the valuation date or on a date immediately preceding the valuation date in case no trading is done on the valuation date.

UNQUOTED SHARES AND SECURITIES

The FMV of unquoted equity shares and securities shall be the value on the valuation date of such unquoted equity shares as determined by the formula prescribed under the rules. The FMV of unquoted shares and securities other than equity shares in a company which are not listed in any recognised stock exchange shall be estimated to be the price at which it could be sold in the open market on the valuation date. The tax payer may obtain a report from Category 1 merchant banker or an accountant as prescribed under the new income tax rules.

CAUTION POINT

It is pertinent to note that these valuation rules are effective October 1, 2009. Therefore, any gift transactions of the property mentioned above which have taken place after the aforesaid date would have to be valued and accordingly offered as tax.

Source : http://epaper.timesofindia.com/