The Indian government has made a significant move in Budget 2023 to tackle tax evasion through gifts. Clause (viiii) of sub-section (1) of section 9 of the Income Tax Act (the Act) was introduced in the Finance (No. 2) Act, 2019 to provide that any sum of money exceeding fifty thousand rupees received by a non-resident without consideration from a person resident in India would be deemed to accrue or arise in India. This was introduced as an anti-abuse provision as it was noticed that gifts were being made by persons resident in India to non-residents and were claimed to be non-taxable in India by such non-residents.
However, it has come to the notice of the government that certain not-ordinarily residents are receiving gifts from persons resident in India and not paying tax on it. To address this issue, it has been proposed to extend the deeming provision to sum of money exceeding fifty thousand rupees received by a not-ordinarily resident without consideration from a person resident in India.
This amendment will take effect from April 1st, 2024 and will accordingly apply to the assessment year 2024-25 and subsequent assessment years. The government's move to tackle tax evasion through gifts will help ensure fairness in the tax system and promote compliance with tax laws.
This comprehensive guide provides an overview of the proposed amendment of section 9 of the Income Tax Act and its implications for individuals receiving gifts from persons resident in India. Stay informed and stay compliant with the latest tax laws and regulations.