Did you know that gifts you receive are also taxed?
As far as gifts received from anyone who is not related to you are concerned, they will not be taxed until their aggregate value does not exceed Rs 50,000.
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Are you planning to avail gold loan? Remember these points or else you will be trappedHow do you know which gift type is tax-free and which are considered part of your income?
Any gifts, big or small, received from family members like parents, siblings, spouse, in-laws etc are completely tax-free. There is no tax even on gifts received on marriage or from a will.
As far as gifts received from anyone who is not related to you are concerned, they will not be taxed until their aggregate value does not exceed Rs 50,000. Beyond this value, the entire amount will be taxable if the gift is received from anyone unrelated to you. This includes gifts received on birthdays or festivals like Diwali. The full sum has to be mentioned in your income tax returns under the ‘income from other sources’ head.
What qualifies as a gift under tax law?
An amount that exceeds an aggregate value of Rs 50,000 qualifies as a gift that is required to be taxed by law if it is received from non-family persons. Gifts under Rs 50,000 are not taxed. But the entire value is taxed when the amount exceeds Rs 50,000. This means that if you receive gifts worth Rs 51,000, the entire amount will be taxed, not just the Rs 1,000 that is beyond the Rs 50,000 threshold.
What are the gifts that are exempted from tax?
Gifts from family members are exempt from tax. This includes gifts from parents, siblings, spouse, in-laws or lineal ascendants and descendants. There is no limit here. In case of gifts from someone not related to you, they will be exempt from tax as long as their aggregate value is not more than Rs 50,000.
How to benefit legally from gift tax exemptions?
To benefit from gift tax, make sure the gifts received from non-family persons do not exceed the aggregate value of Rs 50,000. Furthermore, when giving a gift, the source of the gift should be explained properly and the transfer of gift should be documented as well.
How is the classification of gift and gift tax rates done?
Gifts from non-family persons that exceed an aggregate value of Rs 50,000 are added to the head ‘income from other sources’ and taxed as per the applicable tax slab rate.
Article is written by Archit Gupta, Founder and CEO, ClearTax.com.
