Received a gift card? It could be taxable too - Here is what you must know
It is advisable that one maintains a proper documentation to establish the gift and the donor to justify the gift received.
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5 ways to make Valentine's Day memorable via Amazon India Did you receive a gift card from your employer recently, to acknowledge your work? Or, did you receive a complimentary gift coupon on your shopping? Well, these are nothing but prepaid payment cards which have specific amount of funds or money attached to them which can be used in any form of electronic payment purchases. However, these gift vouchers too, like any financial transactions and other sources of income, undergo tax deductions under the Income Tax rules. According to the Income Tax Rule 3(7)(iv) under the Section 17(2)(viii) of the Income Tax Act, 1961, the valuation of perquisite by way of any gift or voucher or token in lieu of which such gift may be received by an employee or member of his household on ceremonial occasions or otherwise.
It is also provided in Rule 3(7)(iv) that where the value of such gift, voucher or token, as the case may be, is below Rs. 5,000/- in the aggregate, during the previous year, the value of perquisite shall be taken as Nil. In other words, if you received a gift coupon from your favorite retail outlet and that the amount attached to the gift card falls below Rs 5,000, then the amount in not levied with any kind of taxes.
In the case where the amount on the gift card exceeds the taxable amount, then tax is levied accordingly. Under the Section 56(2)(x) of the Income-Tax Act, 1961, tax is levied on gift card will have the Fair market value minus the consideration levied on it, if the FMV exceeds by Rs 50,000.
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However, cases in which the gift vouchers or card received are through wedding events, under a will or way of inheritance, donation or charity by local bodies or individuals into some organisation, will be exempted from tax deduction.
Gifts in India tend to carry more quantum and hence fall under the radar of the income tax department. It is advisable that one maintains a proper documentation to establish the gift and the donor to justify the gift received.
