CA Umesh Sharma
Arjuna (Fictional Character): Krishna, 7th February to 14th February is celebrated as Valentine Week all over the World. This is celebrated by giving gifts and wishes and for that the markets were ready. This market of love gifts is called as “Loveonomics”. Please explain the provisions of Income Tax regarding these Love Gifts.
Krishna (Fictional Character): Arjuna, Love and Affection are the roots of every Life. In India during this Valentine days market turnover of near about Rs. Five Thousand Crores is expected. Thus “Lovenomics” involves big money. A Person earns for his Family, Relatives, friends, etc. The feeling behind giving Gifts is important. Because Money is for Love not Love for Money. The Taxability of gifts is decided on the basis of Gifts given by Whom, When, and which. Consideration for giving gifts is “Love and Affection”, which is not defined in Income tax.
Arjuna: Krishna, Which gifts given out of Love and Affection are not liable to taxes so that Income tax dept does not come in between Love of Valentine?
Krishna: Arjuna, Generally gifts are given during festivals or on certain events. Following Gifts are not taxable according to Income tax act:
1) Income Tax is not required to be paid if Cash or Gifts (Wealth) are given for an amount not exceeding Rs. 50,000. Thus on Valentine day or on any other Occasion, if gift is given to a stranger of below Rs. 50,000 is not taxable in the hands of recipient. Wealth includes Mobiles, Jewelry, Shares, Paintings, immovable property etc. Relationship between doner and donee are the crux for taxation of gifts. Therefore one should be careful while making Love and Tax Planning. No one will give gift to stranger, but the relationship before marriage of a boyfriend and girlfriend is not recognize by Income tax, hence it falls under the category of “Stranger”. It’s very interesting to note this “Stranger” and “Love” relationship and restriction of Rs. 50,000/- for gifts. As Love cannot be measured and restricted by caste or religion.
2) Gifts given and taken by Husbands and Wives are not taxable even though they are exceeding Rs. 50, 000/- amount because they come under the definition of “Relative” in the Income Tax. That seems it is beneficial to give Gifts only after Marriage. But there is Craze of giving Gifts before Marriage and which slowly reduces after Marriage. On the occasion of Marriage Ceremony Gifts received from anyone of any amount are tax-free. But one should keep record of it. True Love blossoms with time and is tested after marriage only, hence gifts between husband and wife may be tax free, which is not before marriage.
Arjuna: Krishna, Which gifts attract taxes when given for Love and Affection other than Valentine Gifts i.e, other than Husband and Wife?
Krishna: Arjuna, other than Husband and Wife, the Gifts given out of Love and Affection by Mother, Father, brother and Sister are not taxable but the doner and donee should fall under definition of “relatives”.
1) Gifts received from Specified relatives are not liable to tax. E.g. there is a difference between Gifts received by Mother, Father, Brother and Sister and those by cousin Uncle and Aunty. The earlier are tax free but the later one is taxable. Hence please refer to the definition and list of relatives as per Income tax act.
2) Apart from above, If Elders share their wealth at the end of their Life through their“Will”, it is not liable to tax in the hands of recipient.
3) If Immovable Property is given as a Gift for an amount less than its stamp Duty value then Income Tax on the differential amount are required to be paid.
Arjuna: Krishna, What one should learn from the “Loveonomics” and “Income Tax”?
Krishna: Arjuna, One should not mix Love and Money together. Love cannot be measured and it should not be compared with Money. Donors’ feeling should be understood behind every gift. The Income Tax Department is in difficulty because in this market of “Loveonomics” there is no record of cash transactions. But this comes to notice when taxpayer for increasing the Capital and when there is lack of cash, entries of gifts received are disclosed and at that time taxpayer has to face the provisions of income tax. Financial position of Donor is verified otherwise problem may arise under the Income Tax. Many lose Love in the greed of Money. One who understands the difference between Love for Money and Money for Love is the one to know true Love.
Image 1 courtesy of Stuart Miles at FreeDigitalPhotos.net
Image 2 courtesy of artur84 at FreeDigitalPhotos.net
Image 3 courtesy of maple at FreeDigitalPhotos.net