Income Tax for AY 2019-20: Got an expensive gift? Keep a documentary proof; here's why
Income Tax On Gift: We often receive cash or jewellery as a gift from relatives on special occasions like marriage or birthdays.
Income Tax On Gift: We often receive cash or jewellery as a gift from relatives on special occasions like marriage or birthdays. We rarely care to preserve the bill of the gifted item, or even the relatives prefer not to give. However, such a practice could prove costly, especially if the gift is precious in terms of monetary value. One should maintain the bill of the gift even while offering it to a relative. Even when you pay cash as a gift to your son, it is important to keep a document. Experts say that cash, checks, properties, jewellery etc received as a gift can be taxed. Hence, is important to keep a documentary proof of the gift.
It is important to get the documentary proof of the gifts prepared. This can be done through a gift deed.
What income tax rules say about monetary gifts received by an individual or Hindi Undivided Family (HUF)
- If the following conditions are satisfied then any sum of money received (i.e, the monetary gift may be received in cash, cheque, draft, etc.) by an individual/ HUF will be charged to tax (*):
a) Sum of money received without consideration.
b) The aggregate value of such sum of money received during the year exceeds Rs. 50,000.
The Income Tax rules further say
- Gifts received from relatives are not charged to tax.
-Friend is not a relative as defined in the list and hence, gift received from friends will be charged to tax (if other criteria of taxing gift are satisfied)
A gift deed helps keep the record of gift taker as well as the giver. In legal language, the one who gives the gift is called the donor and the recipient is called the donee. The gift deed is a valid legal document that works as proof. The gift can be movable or immovable property
Through gift deed, one can save tax on the amount of expensive gifts such as jewellery, property or cash given to relatives. This can be used even by a father while gifting cash to the son, or while transferring a flat purchased by the father to the son.
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With the transfer of property through Gift Deed, one can avoid long-term capital gains/loss but s/he will have to pay the stamp duty as applicable. One doesn't have to pay tax on the amount of money received from relatives as a gift. However, if non-relatives give over Rs 50,000 as a gift in a year, then the amount is taxable. If the gift is above Rs 50,000 then the entire gift amount will be taxable.