5. EXEMPTION IN RESPECT OF CERTAIN GIFTS. –
(1) Gift Tax shall not be charged under this Act in respect of gifts made by any person-
(i) of immovable property situate outside the territories to which this Act extends;
(ii) of movable property situate outside the said territories unless the person –
(a) being an individual, is a citizen of India and is ordinarily resident in the said territories; or
(b) not being an individual, is resident in the said territories, during the previous year in which the gift is made;
1[(iia) being an individual who is not resident in India, to any person resident in India, of foreign currency or other foreign exchange [as defined, respectively, in clause (c) and clause (d) of section 2 of the Foreign Exchange Regulation Act, 1947 (7 of 1947)] remitted from a country outside India in accordance with the provisions of the said Act, and any rules made thereunder, during the period commencing on the 26th day of October, 1965, and ending on the 28th day of February, 1966 or such later date as the Central Government may, by notification in Official Gazette, specify in this behalf.
Explanation.—For the purposes of this clause, the expression “resident in India” shall have the meaning assigned to it in the Income-tax Act;]
2[(iib) being a person resident outside India, out of the moneys standing to his credit in a Non-resident (External) Account in any bank in India in accordance with the provisions of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder.
Explanation—For the purposes of this clause, “person resident outside India” has the meaning assinged to it in clause (q) of section 2 of the Foreign Exchange Regulation Act, 1973 (46 of 1973);
(iic) being a citizen of India, or a person of Indian origin, who is not resident in India, to any relative of such person in India, of convertible foreign exchange remitted from a country outside India in accordance with the provisisons of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder.
Explanation.—For the purposes of this clause and clause (iid),—
(a) a person shall be deemed to be of Indian origin if he or either of his parents or any of his grand-parents was born in undivided India;
(b) “convertible foreign exchange” means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder;
(c) “relative” has the meaning assigned to it in clause (41) of section 2 of the Income-tax Act;
(d) “resident in India” shall have the meaning assigned to it in the Income-tax Act;
(iid) being a citizen of India or a person of Indian origin, who is not resident in India, to any relative of such person in India of property in the form of 3[any foreign exchange asset as defined in clause (b) of section 115C of the Income-tax Act];]
4[(iie) being an individual who is a non-resident Indian, once out of the moneys standing to his credit in an account opened and operated in accordance with the Non-resident (Non-repatriable) Rupee Deposit Scheme, 1992.
Explanation.—For the purposes of this clause, “non-resident Indian” shall have the meaning assigned to it in clause (e) of section 115C of the Income-tax Act;]
(iii) of property in the form of savings certificates issued by the Central Government, which that Government, by notification in the Official Gazette, exempts from Gift Tax;
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6[(iiib) of property in the form of Special Bearer Bonds, 1991;]
7[(iiic) 8[being an individual or a Hindu undivided family, of property in the form of such Capital Investment Bonds] as the Central Government may, by notification in the Official Gazette, specify in this behalf subject to a maximum of rupees ten lakhs in value in the aggregate in one or more previous years:
Provided that the exemption conferred by this clause shall be available only to a person who has initially subscribed to the said Bonds;]
9[(iiid) being an individual or a Hindu undivided family, of property in the form of such Relief Bonds, as the Central Government may, by notification in the Official Gazette, specify in this behalf subject to a maximum of rupees five lakhs in value in the aggregate in one or more previous years:
Provided that the exemption conferred by this clause shall be available only to a person who has initially subscribed to the said Bonds;]
10[(iiie) being an individual who is a non-resident Indian, 11[of property in the form of the bonds specified under sub-clause (iid) of clause (15) of section 10 of the Income-tax Act:
Provided that] where an individual, who is a non-resident Indian in any previous year in which the bonds are acquired, becomes a resident in India in any subsequent year, the provisions of this clause shall apply in respect of the gifts of property referred to in this clause in such subsequent year or any year thereafter.
Explanation.—For the purposes of this clause, the expressions—
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(b) “non-resident Indian” shall have the meaning assigned to it clause (e) of section 115C of the Income-tax Act;]
(iv) to the Government or any local authority 13[or any authority referred to in clause (20A) of section 10 of the Income-tax Act];
(v) to any institution or fund established 14[or deemed to be established] for a charitable purpose to which the provisions of 15[section 80G] of the Income-tax Act apply;
16[(va) (i) to such temple, mosque, gurdwara, church or other place as has been notified by the Central Government for the purposes of 17[clause (b) of sub-section (2) of section 80G of the Income-tax Act]; or
(ii) by way of settlement on trust, of property the income from which, according to the deed of settlement, is to be used exclusively in connection with the temple, mosque, gurdwara, church or other place specified therein and notified as aforesaid;]
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(vii) to any relative dependent upon him for support and maintenance, on the occasion of the marriage of the relative, subject to a maximum of rupees 19[one hundred thousand] in value in respect of the marriage of each such relative;
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(x) under a will;
(xi) in contemplation of death;
(xii) for the education of his children, to the extent to which the gifts are proved to the satisfaction of the 21[Assessing Officer] as being reasonable having regard to the circumstances of the case;
(xiii) being an employer, to any employee by way of bonus, gratuity or pension or to the dependents of a deceased employee, to the extent to which the payment of such bonus, gratuity or pension is proved to the satisfaction of the 27[Assessing Officer] as being reasonable having regard to the circumstances of the case and is made solely in recognition of the services rendered by the employee;
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(xv) to any person in charge of any such Bhoodan or Sampattidan movement as the Central Government may, by notification in the Official Gazette, specify;
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24[(1A) Any reference in clause (v) 25[***] of sub-section (1) to charitable purpose in relation to a gift made on or after the 1st day of April, 1964, shall be construed as not including a purpose the whole or substantially the whole of which is of a religious nature.]
(2) Without prejudice to the provisions contained in sub-section (1), Gift Tax shall not be charged under this Act in respect of gifts made by any person during the previous year, subject to a maximum of rupees 26[thirty thousand] in value.
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Explanation.—For the purposes of this section,—
(a) an individual shall be deemed to be ordinarily resident in the territories to which this Act extends during the previous year in which the gift is made if during that year he is regarded as a resident but not as not ordinarily resident 28[within the meaning of section 6 of the Income-tax Act, subject to the modification that references in that section to India shall be construed as references to the territories to which this Act extends];
(b) a Hindu undivided family firm or other association of persons shall be deemed to be resident in the territories to which this Act extends during any previous year unless, during that year, the control and management of its affairs was situated wholly outside the said territories;
(c) a company shall be deemed to be resident in the territories to which this Act extends during the previous year, if—
(i) it is a company formed and registered under the Companies Act, 1956 (1 of 1956), or is an existing company within the meaning of that Act; or
(ii) during that year, the control and management of that company was situated wholly in the said territories;
(d) “gifts made in contemplation of death” has the same meaning as in section 191 of the Indian Succession Act, 1925 (39 of 1925).
Comments
The gift made in Marz-ul-maut could be regarded as gift made in contemplation of death and such gift is entitled to exemption from gift tax under sub-section (1)(xi); 1991 Tax LR 682 (SC).
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1. Ins. by Act 13 of 1966, sec. 41 (a)(i) (w.e.f. 1-4-1966).
2. Ins. by Act 14 of 1982, sec. 38 (a) (w.e.f. 1-4-1983).
3. Subs. by Act 11 of 1983, sec. 42 (a) (w.e.f. 1-4-1984).
4. Ins. by Act 38 of 1993, sec. 41 (a)(i) (w.e.f. 1-4-1993).
5. Clause (iiia) omitted by Act 23 of 1986, sec. 42 (a) (w.e.f. 1-4-1987). Earlier clause (iiia) was ins. by Act 41 of 1975, sec. 7 (w.e.f. 4-12-1965).
6. Ins. by Act 7 of 1981, sec. 7 (w.e.f. 12-1-1981).
7. Ins. by Act 14 of 1982, sec. 38(b) (w.e.f 1-4-1983).
8. Subs. by Act 11 of 1983, sec. 42(b), for “of property in the form of such Capital Investment Bonds”, (w.e.f. 1-4-1983).
9. Ins. by Act 26 of 1988, sec. 67 (w.e.f. 1-4-1988).
10. Ins. by Act 3 of 1989, sec. 80 (w.e.f. 1-4-1989).
11. Subs. by Act 49 of 1991, sec. 85 (a) (w.e.f. 1-4-1991).
12. Clause (a) omitted by Act 49 of 1991, sec. 85(b) (w.e.f. 1-4-1991).
13. Ins. by Act 66 of 1976, sec. 28 (w.e.f. 1-4-1977).
14. Ins. by Act 21 of 1973, sec. 21(w.e.f. 1-4-1974).
15. Subs. by Act 32 of 1971, sec. 37 (c)(i) for “section 88”(w.r.e.f. 1-4-1968).
16. Ins. by Act 10 of 1965, sec. 71 (i) (w.e.f. 1-4-1965).
17. Subs. by Act 32 of 1971, sec. 37 (c) (ii), for “sub-section (6) of section 88 of the Income-tax Act” (w.r.e.f. 1-4-1968).
18. Clause (vi) omitted by Act 23 of 1986, sec. 42 (a) (w.e.f. 1-4-1987).
19. Subs. by Act 32 of 1994, sec. 55, for “thirty thousand” (w.e.f. 1-4-1995). Earlier the words “thirty thousand” were subs. by Act 38 of 1993, sec. 41(a) (ii), for “ten thousand” (w.e.f. 1-4-1994).
20. Clauses (viii) and (ix) omitted by Act 23 of 1986, sec. 42 (a) (w.e.f. 1-4-1987).
21. Subs. by Act 4 of 1988, sec. 161, for “Gift Tax Officer” (w.e.f. 1-4-1988)
22. Clause (xiv) omitted by Act 23 of 1986, sec. 42 (a) (w.e.f 1-4-1987).
23. Clause (xvi) omitted by Act 23 of 1986, sec. 42 (a) (w.e.f. 1-4-1987). Earlier clause (xvi) was omitted by Act 54 of 1972, sec. 6 (w.e.f. 1-4-1973) and was ins. by Act 67 of 1984, sec. 72 (w.e.f. 1-4-1985).
24. Ins. by Act 15 of 1965, sec. 21 (i) (w.e.f. 1-4-1964).
25. The words “or clause (vi)” omitted by Act 23 of 1986, sec. 42 (b) (w.e.f. 1-4-1987).
26. Subs. by Act 38 of 1993, sec. 41(b), for “twenty thousand” (w.e.f. 1-4-1994). Earlier the words “twenty thousand” were subs. by Act 23 of 1986, sec. 42(c), for “five thousand” (w.e.f. 1-4-1987) and the words “five thousand” were subs. by Act 19 of 1970, sec. 27(a), for “ten thousand” (w.e.f. 1-4-1971), and still earlier the words “ten thousand” were subs. by Act 13 of 1966, sec. 41(a) (ii) (w.e.f. 1-4-1966). Prior to this the words “five thousand” were subs. by Act 5 of 1964, sec. 52 (a) (ii), for “ten thousand”(w.e.f. 1-4-1964).
27. Sub-section (3) omitted by Act 23 of 1986, sec. 42 (d) (w.e.f. 1-4-1987).
28. Subs. by Act 53 of 1962, sec. 4 (ii), for “in the taxable territories within the meaning of the Income-tax Act” (w.e.f. 1-4-1963).
