Deemed Income [Section 56(2)(x)]

This provision applies if any person receives from any person any benefit whose value exceeds Rs. 50,000. This provision is applicable notwithstanding the residential status or class of the assessee. The donor or donee can be an individual, partnership firm, LLP, company, AOP, BOI, co-operative society, or artificial juridical person, whether resident or non-resident.

The deemed income under this provision can arise from the following transactions:

1. Receiving monetary benefits without consideration
2. Receiving immovable property without consideration or for inadequate consideration
3. Receiving specified moveable properties without consideration or for inadequate consideration

Types of Deemed Income

(a)   Monetary Benefits

Where any person receives any sum of money, without consideration, and the aggregate value of such sum exceeds Rs. 50,000, then the whole of the aggregate value of such sum shall be chargeable to tax under the head income from other sources.

The limit of Rs. 50,000 is not transaction-wise, and it shall be checked in aggregate for all transactions that happened during the year. If the aggregate of all transactions exceeds Rs. 50,000, the entire amount shall be chargeable to tax and not the amount in excess of Rs. 50,000.

(b)   Benefits arising from Immovable property

The deemed income under this provision can arise from the following transactions:

1. Where an immovable property is received without consideration and the stamp duty value of the property exceeds Rs. 50,000, then the stamp duty value of such property will be chargeable to tax.
2. Where any other immovable property is received for a consideration which is less than the stamp duty value, the difference between stamp duty value and consideration is chargeable to tax if such difference is more than the higher of  the following two limits:
   • Rs. 50,000; and
   • 10% of the consideration.

In both situations, the limit of Rs. 50,000 shall be checked for every transaction and not in aggregate of all transactions.

Example:

Mr. A acquired an immovable property from Mr. X for Rs. 6,00,000 on 05/06/2022. Compute income chargeable in the hands of the receiver, if any in each of the following cases:

(c)   Benefits arising from movable property

The deemed income under this provision can arise from the following transactions:

1. Where any property is received without consideration and the aggregate fair market value of which exceeds Rs. 50,000, the whole of the aggregate fair market value of such property will be chargeable to tax.
2. Where any property is received for a consideration which is less than the aggregate fair market value of the property by an amount exceeding Rs. 50,000, the difference between fair market value and consideration is chargeable to tax.

In both situations, the limit of Rs. 50,000 shall be checked for every transaction and not in aggregate of all transactions.

This provision applies to any property in the nature of shares and securities, jewellery, archaeological collections, drawings, paintings, sculptures, any work of art, bullion, or virtual digital asset. Where the transaction involves any other movable property, excess of consideration over the fair market value shall not be chargeable to tax.

Example: A gift of a motor car, whose fair market value is Rs. 55,000, is not taxable as it is not covered under the definition of movable property under this provision.

Aggregation of deemed income

While computing the deemed income exceeding the threshold limit, the value of the transaction under each category (i.e., monetary benefit, immovable property, and movable property) shall be clubbed.

Exemption from tax

Due to the specified event

Income shall not arise under this provision if any sum of money or any property is received:

• on the occasion of the marriage of the individual;
• under a will or by way of inheritance;
• in contemplation of the death of the payer or donor;

Due to the status of the donor/payer

Income shall not arise under this provision if any sum of money or any property is received from:

• any specified relative;
• any local authority;
• any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in Section 10(23C);
• any trust or institution registered under Section 12A/Section 12AA/Section 12AB;
• an individual by a trust created or established solely for the benefit of a relative of the individual.

Specified Relative -

In the case of HUF, every member of HUF will be treated as a relative. However, in the case of an individual, the following persons are treated as a relative for the purpose of this provision:

Due to the status of the donee/payee

Income shall not arise under this provision if any sum of money or any property is received by:

• any trust or institution registered under Section 10(23C);
• any trust or institution registered under Section 12A/Section 12AA/Section 12AB;
• ;
• any fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in Section 10(23C)(iv)/(v)/(vi)/(via);

Due to Covid-19

Income shall not arise under this provision if any sum of money or property is received:

• For Covid-19 treatment from any other person

Any sum of money or any property in respect of any expenditure actually incurred by a person on his medical treatment or treatment of any member of his family, for any illness related to COVID-19. This benefit shall be allowed subject to such conditions as the Central Government has notified via Notification No. 91/2022, dated 05-08-2022.

• Sum of money or property received by a family member of a person who died due to Covid-19

  Any sum of money or any property received by a family member of a person who died due to Covid-19, the money or property so received shall not be charged to tax in the hands of the family member where such money or property is received from the employer of a deceased person.

  Where the money or property is received from any other person or persons, the exemption amount shall be limited to Rs. 10 lakhs in aggregate. Thus, where the aggregate amount of sum received from other persons during the previous year exceeds Rs. 10 lakhs, then the excess amount shall be taxable in the hands of a family member of the deceased.

This benefit shall be allowed only if the payment is received within 12 months from the date of death of the person and subject to such other conditions as the Central Government has notified via Notification No. 92/2022, dated 05-08-2022.

Meaning of Family The meaning of family, in relation to an individual, means the spouse and children of the individual and the parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual.