Report No. 250
35. Gift-Tax Act, Act 18 of 1958
Category: Taxes, Tolls and Cess Laws
Recommendation: Repeal and remove from the Law Ministry's lists of central Acts
This Act provided for the levy of gift-tax. The Act charged for every assessment year a tax referred to as gift-tax in respect of the gifts, if any, made by a person during the previous year at the rate(s) specified in the Schedule appended to the Act.
However, gift-tax was abolished as per Section 75 of the Finance Act, 1998. Consequently, the Act ceased to have effect after 1th October 1998. Due to misuse of the abolition of gift-tax in the form of widespread transfer of insincere gifts from non-relatives, Section 56(2)(v) of the Income Tax Act, 1961 was enacted.
According to Section 56(2)(v), any amount exceeding Rs. 25,000 obtained by a person or a Hindu Undivided Family (HUF) without any consideration from any person on or after 1th September 2004 but before 1th April 2006 would be taxed. Since this amendment was made into the Income Tax Act, 1961, the Gift-Tax Act, 1958 is still not in force.
The Act has been kept in abeyance and still remains on the statute book. The Central Government should formally repeal this Act. If the need to impose gift-tax arises, the same can be met with enacting a new law on gift-tax, whenever necessary. This Act has also been recommended for repeal by the PC Jain Commission Report (Appendix A-1).