As the festive season 2022 is starting next week with Navratras, followed by Dussehra, Dhanteras and Diwali, there will be gift exchanges during the period. Though the gifts you receive are not considered your direct income, they attract taxes under Section 56(2) of the Income Tax Act, 1961, unless they fall under the exempted category. Here’re some rules related to taxes on gifts everyone should know:
Gifts from Relatives
Any gift received from relatives is tax-exempt, if the relatives come under the definition of ‘relative’ for this purpose under the Income Tax Act.
For this purposes, ‘relative’ means spouse of the individual; brother or sister of the individual; brother or sister of the spouse of the individual; brother or sister of either of the parents of the individual; any lineal ascendant or descendant of the individual; any lineal ascendant or descendant of the spouse of the individual; and their spouses.
Gifts From Friends
Gifts received from friends fall under the ‘income from other sources’. They are added to your income and tax is charged. However, the tax is levied when the value of the gifts crosses Rs 50,000 in a year. There is no tax on gifts worth less than Rs 50,000 a year.
Importantly, gifts received on the occasion of marriage of an individual is not charged to tax.
Gifts From Employer
Gifts from the employer attract tax if they cross Rs 5,000 in a year. Gifts worth below Rs 5,000 in a year from employers do not attract tax. The gifts above Rs 5,000 are considered ‘perquisites’ and taxed accordingly.
Movable and Immovable Property As Gift: Tax Treatment
The difference between the consideration of the property (movable or immovable) and the value of stamp duty will be considered a taxable gift, if received for inadequate consideration. It has an exempt value of Rs 50,000. So, if the difference is less than 50,000, the transfer will not be considered a taxable gift.
According to the Income Tax Act, 1961, an immovable property received without consideration by an individual or HUF will be charged to tax if the immovable property (being land or building or both) is received by an individual/HUF; is a capital asset within the meaning of section 2(14) for such an individual or HUF; and the stamp duty value of such immovable property received without consideration exceeds Rs 50,000.
Read all the Latest Business News and Breaking News here
For all the latest business News Click Here
