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Tax Treatment of Gift

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As per Income Tax Ordinance, 2001 there is no tax implication over gift received from any one, however gain on sale of such asset that was received as gift would be treated under section 37 of ITO, 2001 that is as follows;

37. Capital gains

(1) Subject to this Ordinance, a gain arising on the disposal of a capital asset by a person in a tax year, other than a gain that is exempt from tax under this Ordinance, shall be chargeable to tax in that year under the head “Capital Gains”.

(2) Subject to sub-sections (3) and (4), the gain arising on the disposal of a capital asset by a person shall be computed in accordance with the following formula, namely:–
A – B
A is the consideration received by the person on disposal of the asset; and
B is the cost of the asset.

(3) Where a capital asset has been held by a person for more than one year, the amount of any gain arising on disposal of the asset shall be computed in accordance with the following formula, namely:–
A x  ¾
where A is the amount of the gain determined under sub-section (2).

(4) For the purposes of determining component B of the formula in subsection (2), no amount shall be included in the cost of a capital asset for any expenditure incurred by a person –
(a) that is or may be deducted under another provision of this Chapter; or
(b) that is referred to in section 21.

(4A) Where the capital asset becomes the property of the person-
(a) under a gift, bequest or will;
(b) by succession , inheritance or devolution;
(c) distribution of assets on dissolution of an association of persons; or
on distribution of assets on liquidation of a company, the fair market value of the asset, on the date of its transfer or acquisition by the person shall be treated to be the cost of the asset.

(5) In this section, “capital asset” means property of any kind held by a person, whether or not connected with a business, but does not include –
(a) any stock-in-trade (not being stocks and shares), consumable stores or raw materials held for the purpose of business;
(b) any property with respect to which the person is entitled to a depreciation deduction under section 22 or amortisation deduction under section 24;
(c) any immovable property; or
(d) any movable property (excluding capital assets specified in sub-section (5) of section 38) (Substituted for "(including wearing apparel, jewellery, or furniture)" by Finance Act, 2003) held for personal use by the person or any member of the person’s family dependent on the person.


posted @ 4:49 PM,


At February 18, 2009 at 3:59 PM, Anonymous PreetDunia said...

What about Sub Section 2 ofd Section 79?

At July 26, 2009 at 2:52 PM, Anonymous Anonymous said...

Before proceeding further it is imperative to mention that gifts are made out of natural love and affection and in this respect Contract Act, 1872 citations may please be kept in mind.


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