Diwali gift for loved ones? Get ready to pay hefty tax; check full list here
Gifts are exchanged on numerous occasions like weddings, Diwali, birthdays and anniversary. But little did you know that these gifts are taxable and taxman have a role in what you are going to gift away!
In Indian culture, it is thousands of years of common practice as well as various traditions of taking and giving gifts to our loved ones on festivals like Diwali, or occasions like weddings, birthdays and anniversary. Gifts are exchanged on numerous occasions. But little did you know that these gifts are taxable and taxman have a role in what you are going to gift away!
Yes, gift transactions can also be taxed. After a certain limit and one needs to pay income tax on gifts received by them. Therefore, the Government of India introduced Gift Tax in April 1958 regulated by the Gift Act, 1958 (GTA). But when Yashwant Sinha became Union Finance Minister he ended this Act in 1998. Diwali is round the corner and you might be planning what to gift to your loved ones.
Prior to 1998, the one who gave gifts (donor) had to pay 30 % tax under the Gift Act.
In 2004, certain provisions were introduced and all the gifts taken by blood relations were exempt under Section 56. But if conditions given in the section were violated, gifts were taxable.
Meanwhile, as per the law amended in the year 2017, ‘‘gifts received by any person are taxed in the hands of recipient under the head ‘Income from other sources’ at normal tax rates”.
Sometimes, in our enthusiasm or due to festivities, we end up buying gifts for people that involve large money transactions. But do you know that these gifts beyond a point invite tax scrutiny. To ensure that Diwali gift does not become a tax pain in future, these are the rules you must follow. It is about spending wisely and following rules. Indiatvnews.com brings to you the complete list of taxable/non-taxable gift transactions. Our aim is not to discourage you from buying Diwali gift but to ensure that you enjoy Diwali and stay away from any tax liabilities.
In these relationships gifts can't be taxed:
- Husband-wife relation
- Brother or sister
- Spouse's brother or sister
- Mother/ father's brother or sister
- Gift from grandparents
- Son or daughter
- Brother/ Sister's spouse
Following are the provisions of the Gift Tax Act.
| KIND OF GIFT COVERED | MONETARY THRESHOLD | QUANTUM TAXABLE |
|---|---|---|
| Any amount of money without consideration | Sum > 50,000 | Total amount of money received |
| Any immovable property such as land, building, etc. without consideration | Stamp duty value > Rs 50,000 | Stamp duty value of the property |
| Any immovable property for inadequate consideration | Stamp duty value exceeds consideration by > Rs 50,000 | Stamp duty value Minus the consideration Example 1: Stamp duty value Rs 3,00,000 Consideration Rs 75,000. Taxable amount is Rs 2.25 lakhs (stamp duty value exceeds consideration by > Rs 50,000) Example 2: In Example 1, if consideration is Rs 2,80,000, taxable gift amount is Nil as stamp duty value does not exceed consideration by > Rs 50,000 |
| Any property (jewelry, shares, drawings, etc.) other than immovable property without consideration | Fair market value * (FMV) > Rs 50,000 | FMV of such property |
| Any property other than immovable property for a consideration | FMV exceeds consideration by > Rs 50,000 | FMV Minus consideration (Same example in case of immovable property can be referred) |
(Source: incometaxindia.gov.in/Acts/Income-tax%20Act,%201961/2014/102120000000037175.htm)
These gifts are tax-free
- Gift on weddings
- Gift from relatives
- Gift by will or inheritance
- Gift received from local administration
- Gift received from any educational institution (under section 10 (23))
- Gift received from charitable organization
Gift taxable from parents?
- Gift tax-free in blood relation
- No tax on gifts received from parents, siblings
- Gift will tax-free even if it is more than Rs 50,000
Are gifts in cash and kind, both taxable?
Yes, all kinds of gifts including cash, gold, real estate, paintings or any other valuable item are taxable. However, if the cash amount or value of the gift in kind is less than Rs 50,000 the same would not be taxable.
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