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GIFT TAX IN INDIA

GIFT TAX IN INDIA

 

GIFT TAX PIC

GIFT TAX IN INDIA

Under the latest law, any gift received by a person in cash or kind which exceeds Rs 50,000 will be taxed as ‘income from other sources’ u/s 56 (2) of the Income Tax Act.

This is also applicable to movable or immovable property which has been purchased for inadequate or less amount payment. It is taxed under “income from other sources”.

The value of any property, other than cash, transferred by way of gift shall, be its value as on the date on which the gift was made.

Exemption in respect of certain gifts

  • Gifts received on occasion of the marriage
  • Under a will or by way of inheritance
  • In case of death of the payer
  • By way of bonus, gratuity or pension or to the dependents of a deceased employee
  • Gifts from relatives on the occasion of marriage
  • NRI can gift their parents from NRE account

Gift received by a daughter-in-law from her parents-in-law is exempt from tax. While, son-in-law receiving gift from his parent-in-law is taxable.

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Recommended Read: professional-tax-rates

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In India we express our love and affection through gifts. Brothers gift sisters on Raksha Bandhan. Parents gift their children on every occasion, especially during marriage. Grandchildren are the recipients of loads of gifts from grandparents. We often hear of cars being gifted and homes being given to family members.

But do these gifts turn taxable after a limit? Do your elders need to pay income tax on gifts before presenting them?

As per the www.cakart.in if the value of gifts received is more than Rs 50,000 a year, then such amount is taxed as income in the hands of the receiver. These gifts may be in any form – cash, jewelry, movable and immovable property, shares etc.

However, this rule is not applicable if your relatives present the gifts. Now just to escape gift tax in India you can’t call a person your relative saying he is the son of my uncle’s neighbor’s vendor’s sister! To avoid scenarios like these, the income tax rules specify relatives from whom tax free gifts can be received. These are:

  • Parents
  • Spouse
  • 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.

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GIFT TAX IN INDIA

Recommended Read: Pensioners Income Tax

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GIFT TAX IN INDIA

Also, the gifts can be exempt even if they aren’t received from these relatives, if they are received during your marriage. So, stop fretting about the Income Tax Department questioning you about the car that was gifted by a distant relative at your wedding. But ensure that the date mentioned on the gift deed is of your marriage day or at least close to that date.

Just like marriages, there is no tax implication of gifts received as a result of inheritance. If the gifts come to you by way of a will then you aren’t supposed to pay any tax on the amount. However, the income generated later say by way of rent on a house inherited by you would be taxable.

–  You need not include the amount you got from local authorities or educational institutions as gifts for your good deeds or on the basis of merit.

–  However, if the amount of gifts received on occasions other than the above and from a person who isn’t a relative as specified exceeds Rs 50,000, then the entire amount would be added to your income. So, don’t make the mistake of adding just Rs 10,000 to your income, if a friend gifts you Rs 60,000 for helping his parents.

Caution

Always get the documentation done when there is an exchange of big gifts and 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.

Consult your chartered accountant on the tax liability due to investing money received as gifts. Rules related to clubbing of income would apply on certain instances thereby increasing the tax liability.

GIFT TAX IN INDIA

Few examples to understand

  • Example 1: If Raju receives any gift from his friends, relatives or colleagues on his wedding it will not be taxed under Raju’s hands. In case he inherits a movable/immovable property, it will also not be taxed.
  • Example 2: If Raju buys gift for his wife Rinku worth Rs 10 lakh, it is not taxable in the hands of Rinku.
  • Example 3: If Raju gifts a diamond necklace worth Rs 8 lakh to Rinku before wedding, then it will be taxed. (As relative clause will not be valid in this case)
  • Example 4: If Rahul cash gifts Raju an amount of Rs 30,000, it is also not taxable. In case, if Rahul gifts another Rs 21,000 in the same financial year than the entire amount will be taxable in the hands of Raju.

Also Read: Professional Tax Rates

GIFT TAX IN INDIA

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GIFT TAX IN INDIA

GIFT TAX IN INDIA

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