Query on Gift U/s 92 of Income Tax Act,2025.

[Amundhra]

I need your advice on a family property transaction for this financial year (FY 26-27). Here are the exact facts of the case:

The Transaction: My dad is receiving a land parcel as a gift from his aunt without consideration.

Financial Values: The land is sitting in the donor's books at a historical cost of Rs. 15,000, but the current statutory Stamp Duty Value (SDV) is Rs. 2 Crores.

The Legal Twist: When my dad was 15, he was legally adopted by this exact same uncle (the donor's husband), and we have a registered adoption deed for it.

The Mismatch: His official identity documents (PAN, Aadhaar, etc.) were never updated after the adoption-they all still carry the name of his biological father.

Given these facts, I want to ask you a few questions regarding the exact taxability of this transaction under the Income Tax Act, 2025:

If the IT department goes strictly by his current PAN/Aadhaar IDs, the donor is his biological uncle's wife. Does she qualify as an exempt relative under the new Act?

If the registered adoption deed is taken into account, the donor legally becomes his adoptive mother. Does that change or complicate the relative exemption?

Considering the document mismatch between the adoption deed and his current KYC, is this transaction completely tax-exempt, or could it trigger a major tax liability? How should we legally frame the relationships in the Gift Deed to keep it safe at the Sub-Registrar's office?

Also, regarding bookkeeping, how much should we record this land at in my father's balance sheet? Should we bring it in at the donor's cost of Rs. 15,000, or can we record it at the Rs. 2 Crore i.e. the stamp duty value on which the tax is paid to the registrar.

[Sanjeev Agarwal]

1. Taxability of Rs. 2 crore gift: The gift of land without consideration would ordinarily fall under the immovable-property gift provision based on the Rs. 2 crore SDV. However, receipt from a "relative" is specifically excluded from taxation.
2. Biological family relationship: If the donor is the wife of your father's biological maternal/paternal uncle, she qualifies as a relative. Therefore, the Rs. 2 crore SDV should not be taxable as income from other sources merely because the property value is Rs. 2 crore.
3. Adoption: The registered adoption deed provides an additional relationship basis: the donor can also be described as your father's adoptive mother, assuming the adoption is legally valid. This strengthens rather than weakens the exemption.
4. PAN/Aadhaar mismatch: The fact that PAN/Aadhaar continue to show the biological father's name does not by itself make the gift taxable. Tax law determines relationship based on the legally relevant facts, not merely KYC nomenclature. Nevertheless, because the property is worth Rs. 2 crore, the documentary trail should be exceptionally clear.
5. Gift Deed drafting: State both relationships accurately:
   (a) donor is the wife of the donee's biological maternal/paternal uncle; and
   (b) donor is also the donee's adoptive mother pursuant to the registered adoption deed dated ____.
   Mention the adoption deed particulars and retain supporting family/identity documents.
6. Rs. 15,000 vs Rs. 2 crore: Do not treat Rs. 2 crore SDV as your father's tax cost merely because it is the stamp value. For future capital gains, the special gift rule generally carries forward the previous owner's acquisition cost, subject to the applicable statutory adjustments. Thus, on the stated facts Rs. 15,000 is the relevant starting tax cost-not Rs. 2 crore.
7. Balance-sheet value: Accounting carrying value is a separate issue from tax cost. Do not automatically record Rs. 2 crore simply because it is the SDV. The appropriate accounting treatment depends on whether your father holds the land personally, as an investment, or as business/stock-in-trade.

Overall position: Strong, provided the biological-uncle relationship is factually correct and the Gift Deed/documentation establishes it clearly.

[Amundhra]

Sir, regarding the balance sheet value, what would happen in the either cases i.e. if he holds it as an investment or rather if he holds it as stock in trade?

[Sanjeev Agarwal]

If investment: don't book Rs. 2 crore merely because SDV is Rs. 2 crore; tax cost generally remains linked to the previous owner's cost.

If stock-in-trade: don't automatically book Rs. 2 crore either. First establish genuine conversion into stock-in-trade and determine the appropriate accounting value under the applicable accounting framework. For income-tax, separately establish the FMV on the conversion date, because that value is specifically relevant under the conversion rule.

One further fact is crucial: whether your father is maintaining regular books of account as a proprietor/businessman and, if yes, whether he follows Ind AS, Accounting Standards (AS), or another applicable framework. That will determine the precise balance-sheet entry, and I would not recommend finalising the Rs. 2 crore/Rs. 15,000 accounting entry without that fact.

[Amundhra]

For the tax cost I understood that we have to consider the cost to previous owner. But i am asking regarding the balance sheet entry, at how much should he record it in the balance sheet if he shows it as investment. He is maintaining regular books of accounts as per Accounting Standards as a sole proprietor.

AI Summary

Relative exemption for gifted land depends on legally established family relationships and clear supporting documentation, not identity-record nomenclature.
Gifts of immovable property received without consideration ordinarily attract taxation by reference to stamp duty value unless received from a qualifying relative. The donor's status as the wife of the donee's biological uncle, and additionally as adoptive mother under a valid registered adoption, may support the relative exemption. KYC records do not alone determine the legal relationship, but the gift deed should clearly record and support both relationships. Stamp duty value is not automatically tax cost or accounting carrying value; prior owner's cost generally remains relevant for future capital gains, while accounting treatment depends on classification and applicable standards.