Cash gifts received without banking channel chargeable to tax

Cash gifts received without banking channel chargeable to tax

ISLAMABAD: Any cash gift received by a person other than banking channel will be treated as chargeable to tax, sources in Federal Board of Revenue (FBR) said on Thursday.

The sources said that in the past people were taking advantage of incentives granted on gifts and concealed their income to evade taxes.

However, the change in the law through last budget those people will no more dodge the tax authorities of claiming gift from their relatives and evade taxes.

The FBR had conducted an analysis of income tax returns filed in previous years, which showed that huge amount of non recurring receipts from un-related persons are transferred in the garb of gifts to avoid incidence of taxation.

The sources said that in order to discourage this practice of undisclosed receipts, Section 39 of Income Tax Ordinance, 2001 had been amended through Finance Act, 2019.

The amendment enabled the tax authorities to include any amount or fair market value of any property received by a person without consideration or received as a gift in income under the head ‘income from other sources.’

However, gift received from grandparents, parents, spouse, brother, sister, son or a daughter shall not be included in such income.

The new income provision is subject to sub-section 3 of Section 39 which states that an amount received by a person otherwise than by a cross cheque drawn on a bank or through a banking channel from a person holding a National Tax Number (NTN) shall be treated as income chargeable to tax under the head ‘income from other sources’.

This means that the gift received by a person is chargeable to tax if gift is not received from grandparents, parents, spouse, brother, sister, son or a daughter of the recipient.

However, even if cash gift is received from the relations mentioned above but the same has not be received through cross cheque or banking channel, as the case may be, the amount of gift will still be added in income chargeable to tax under the head, income from other sources.

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