If you receive a gift from any of your relatives or friends for Christmas or New Year or Pongal or any festival, worth more than Rs. 50000, as per income tax laws, it may be taxable income on your hands in certain situations.
Not only the income, if a person receives a gift, if the value of the gift is exceeding the certain limit then he/she must add it in his income and pay the income tax. There are certain exceptions on declaring the gifts as income.
Gifts received From Relatives
As per the Income tax act, the Gifts received from any of your relatives are fully exempt from tax. Whether you are received the gifts as Cash, Cheque or any goods. You are not liable to pay the tax for these gifts. Here the “relatives” term defines by the Income Tax act as follows :
For example if you are receiving gift of Rs.100000 from your uncle (your mother’s brother), it is fully exempt from the Tax. Whenever you get the gifts please apply the relations in the above list to ascertain whether you are liable to pay any tax for the received gift.
Gifts received From Non-Relatives
Here non-relatives means anyone who doesn’t come under the above mentioned relation for you. In this case you are tax exempt up to maximum of Rs.50000 for a financial year. If you receive the gift worth more than Rs.50000, you are liable to pay the tax whatever you received excess of the limit. This rule applies when the gift is a sum of money, whether in cash, by way of cheque, bank draft or any articles which is value more than the Rs.50000.Online GST Certification Course by TaxGuru & MSME- Click here to Join
For example you are receiving a gift of Company Shares from one of your team mate in your company or when you are receiving a gift of Rs.100000 (cheque) for the best performing in your company (not a bonus), Rs.50000 is liable to pay tax
The simple answer is “NO”. Any gift in the form of articles, shares or cash are not taxable on your hand. If you want to understand the gift related income tax laws, Under section 56 of the Income-tax Act, any money received without consideration which is exceeding Rs. 50000 is taxable on your hand. But, there is exception on certain situations.
The money is received from a relative, which includes, among others, any lineal ascendant or descendant of the individual is fully tax exempt on your hand. So, it is very clear that money received from your mother or father would be not taxable on your hand.
Another important point, if you want to claim the tax exemption on the gifts, please make sure that you have the gift deed executed and who is gifting signed on the papers. Without that the gift laws are not valid for claiming the exemptions. You may consult a lawyer for the documentation with respect to the gift transaction.
One very happy feature of the provision of taxation of gifts is that any gift received from any person on the occasion of the marriage of the gift’s recipient would not be liable to income tax. There is no monetary limit attached to this exemption. Note that, if you receive any gifts at the time of engagement or the marriage anniversary if liable to pay the tax.
Special Tax Exempt gifts
The following list of gifts are fully exempted from Tax whether the it is received as Cash, or any other form of the material doesn’t affect the exemption.
I hope this post would have given you good idea on the gift from your close relatives. If you receive any favor from your mother or father for very huge amount, it is advised to have the gift deeds to avoid any future income tax problems. If you have any questions on the gift taxes, please post it in the comments section or send a mail to email@example.com
T.Xavier M.Com,PGIT, (ICWAI- Final)