Bangalore: Gifts are special things to surprise your loved ones. Anything from a small pen to the extremely costly diamond can be given as a gift. Gifts are a symbol of love. The perspective of the term gift vary from middle class people to the rich ones. But after the digital India has born, everyone thinks for a minute before gifting. One question that arises in everyone’s mind is, “Are these gifts taxable?” especially when the gift is in the form of “Cash”.
Now let’s make a check on how much gift is tax free in India:
As per the Income Tax Act, 1961, in India, from 01.04.2006, if the value of the gifts received are more than Rs. 50,000 a year, then such amounts are taxed as income in the hands of the receiver. Previously the limit was Rs. 25000 (from 01.09.2004 to 31.03.2006). These gifts cannot only be cash but also jewelries, drawings, paintings, sculptures or any work of art exceeding Rs.50000, movable and immovable property, shares etc. This Income tax rule will not work if a person has received gifts from his/her relative. That doesn’t mean that one can simply escape from paying tax by saying a costly gift has been received from the relatives. In order to avoid this happening, the income tax rules in India, specify a list of relatives from whom when gifts are received are not taxable. These include:
Your and your spouse’s brothers and sisters
Brothers and sisters of your parents
Your lineal descendants (including spouses)
Lineal descendants (including spouses) of your spouse
There are some more exceptions apart from the relatives, which include:
Gift received on the occasion of marriage of the individual
This point make clear that if any gifts that are received at marriage, are not liable to be taxed. So any gifts that are presented on wedding are not questionable by Income Tax Department but be sure that the date mentioned in the gift deed is the marriage date or at least any date near to the wedding.
Gift received under a will or inheritance
There is no tax implications, if any gifts come to a person by the way of will or as a result of inheritance. But if the income is generated by the way of rent from the inherited house, then it is taxable.
Gift received due to the death of the payer
Similar to the gifts received on marriages, any cash or things received on any death events is not taxable.
However, if any gifts are received as amounts on occasions apart from the above mentioned criteria, then the whole amount is taxable. The gift value has to be reported under income from other sources along with the total income that comes under the tax slab rates applicable in that financial year. The cash or cheque amount, stamp duty value of property and estimated value of other assets will be chargeable as income. And also remember to get the documentation done when there is an exchange of big gifts and also note the occasion on the document. It would be easier to convince an assessing officer at the time of tax scrutiny if the written proofs are ready.