Business

Is gift from `non-relatives' taxable?

I recently responded to an appeal for fund in a newspaper for kidney operation for an indigent person. Though my contribution was small, I was intrigued by the doubt, whether the poor recipient would be taxed on such receipts especially since the aggregate is likely to exceed the exemption limit of Rs. 25,000 permitted by law. Is there any exception for such gifts. Will any direct remittance to the hospital save liability for the affected person?

It is true that the limit of Rs. 25,000 applies to the total amount of gifts received, so that an indigent person, who gets the assistance from others exceeding this amount would strictly be liable to tax on these gifts from non-relatives with reference to Sec. 56(2)(v) of the Income-tax Act.

There are, however, exemptions other than those received from relatives, where the gifts are on the occasion of marriage, under a Will or by way of inheritance or in contemplation of death of the payer.

Since the possible death contemplated for exemption is of the donor, the exceptions are also of no help to the recipient. Could it be claimed that these are not gifts at all?

Such a claim would fail because what is contemplated by the definition is receipt of any sum without consideration.

Since such assistance is given without consideration except one of sympathy and kindness, which are not consideration in law, the inference of gift cannot be avoided.

Even the donation directly sent to the hospital for the benefit of particular individual may not avoid liability, since it will be construed as a receipt on his behalf. The contingency pointed out by the reader is one which should merit the attention of the Government and exception should be made for such gifts.

S. Rajaratnam

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