Narayana Murthy gifts over Rs 240 crore worth of Infosys shares to his 4 month old grandson

Narayana Murthy, the founder of Infosys, has recently made headlines by gifting Infosys shares worth over Rs 240 crore to his four-month-old grandson, Ekagrah Rohan Murty. In India, the taxation of gifts follows specific rules outlined in the Income Tax Act. While gifts from relatives, inheritances, or those received on occasions like marriage or through a will are generally exempt from taxation, gifts from non-relatives are subject to taxation if their value exceeds certain limits.

Under Section 56 of the Income Tax Act, gifts in the form of money, immovable properties, or specified movable properties received for no or inadequate consideration from non-relatives are considered taxable income. The value of these gifts is included in the recipient's income under the category of 'income from other sources' and taxed according to their applicable income tax slab. In the case of gifts to minors, the tax responsibility falls on the parent or legal guardian.

Taxation on gifts occurs under the following circumstances:

Money Gifts: Taxation applies if the aggregate value of money gifts received exceeds Rs 50,000 in a year. Gifts below this threshold are not taxed.

Movable Property: If specified movable properties received without consideration exceed Rs 50,000 in aggregate fair market value, the entire amount is subject to tax. Similarly, if the recipient pays inadequate consideration for movable properties and the differential amount exceeds Rs 50,000, it is taxed.

Immovable Property: The stamp duty value of immovable properties received without consideration, exceeding Rs 50,000, is fully taxable. In cases of inadequate consideration, the difference between the stamp duty value and the consideration paid is taxed if it exceeds Rs 50,000.

It's important to note that the Rs 50,000 annual limit applies separately to money gifts and movable properties, while in the case of immovable property, the limit applies to each property transaction.

However, there are exemptions from taxation:

Gifts from relatives are not taxed, regardless of their value. Relatives include spouses, siblings, parents' siblings, and lineal ascendants or descendants.

Gifts received on the occasion of marriage, through a will, or by way of inheritance are exempt from taxation.

Certain amounts received from specific funds, foundations, educational or medical institutions, charitable trusts, and institutions specified under the Income Tax Act are also exempt.

In conclusion, while gifts from non-relatives may be subject to taxation if they exceed specified limits, gifts from relatives and those received on certain occasions or from specified entities are generally exempt from tax under the Income Tax Act in India.