The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that a gift of Rs 20 lakh received by a taxpayer from his non-resident brother is not subjected to Income tax. This landmark ruling by ITAT emphasises that Indian tax laws offer taxpayers an exemption from tax on gifts received from their relatives.
Under the Income Tax Act, a gift of more than Rs 50,000 received from a relative is considered ‘income from other sources’. Therefore, the required tax is deducted from it as per the prescribed rates of income tax. However, in many cases, the tax was exempted from offerings or gifts received from close relatives, at weddings and inherited property.
Section 56 (2) (x) of the Income Tax Act provides tax exemption on gifts received from a brother. The Income Tax Appellate Tribunal gave the tax exemption decision in the case of a person named Salam, who received a gift from his brother. However, the Income Tax Department officer initially considered this gift as taxable income. The Income Tax Commissioner justified the officer’s decision and said that the taxpayer failed to prove that he received this money as a gift from his brother. Following this, Slaam filed an appeal at the ITAT.
The recipient of the gift, A Salam provided evidence that his brother who has been living in Dubai for 25 years has made a gift out of ‘natural love and affection’. His brother, long-time resident of Dubai, is engaged in a business in the Gulf nation. During the appeal, the petitioner said that the amount by his brother was then transferred through three cheques from the Bank of Baroda and ICICI Bank. To further prove the identity and financial capacity of his non-resident brother, Salam submitted his brother’s bank statements, passport, and investor class visa. The gift dated August 26, 2022, was also given to support the legitimacy of the given gift.
ITAT member Prashant Maharishi who headed the case took note that the parental names of the petitioner and the brother matched in addition to the evidence provided. After confirming them to be brothers, Prashant Maharishi concluded that Rs 20 lakh received as a gift to A Slalam is a non-taxable income. He directed the tax officials to withdraw the additions.
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