It is customary in Indian for households to alternate present on the event of marriage. This article offers with tax implications of such items obtained.
General Provisions for taxation of Gifts in India
Before abolition of the Gift Tax Act in 1998 the donor (giver of the present) was required to pay present tax on the worth of present over Rs. 30,000/-. After the abolition, neither the recipient not the donor was subjected to any tax. This lacuna was grossly misused and which pressured the federal government to usher in provisions to tax the items within the palms of the recipient in case the combination of the all of the items throughout a yr exceeded sure threshold restrict. Presently this threshold restrict is fifty thousand rupees. It is the combination worth of all of the items obtained through the yr and never the worth of a person present which is to be taken under consideration for figuring out taxability of the items.
Specific provisions relevant to marriage items
While offering for taxation of items within the palms of recipient, the lawmakers offered sure exceptions. Marriage items are one of many exceptions offered within the regulation. In India we’ve got custom the place kinfolk in addition to the bride and groom obtain items on the event of marriage. Are all these items coated below the wedding exception, and due to this fact tax free? The reply is solely no. It is barely the couple getting married who enjoys the exception and never all of the kinfolk. The items obtained by the couple are absolutely tax free with none higher restrict. These items needn’t essentially be from the kinfolk solely to get pleasure from this exemption.
So all of the items obtained by the bride and groom, no matter worth, are tax free of their palms however the different kinfolk have to incorporate full worth of the items of their revenue, whether or not obtained in money or variety, in case the combination of worth of all of the items, together with these items, obtained through the yr exceeded fifty thousand rupees. However, items obtained by one relative from one other relative are absolutely tax-free in case of sure specified kinfolk no matter any event.
Clubbing provisions
Though items obtained by bride and groom are absolutely tax free of their palms on the event of their marriage however some clubbing provisions will come into play if these items are obtained from sure specified kinfolk. Income arising from the present obtained by a daughter in regulation from her father in regulation or mom in regulation is required to be added to the revenue of the in-law who had given the present. However, in case of items given to daughter in regulation earlier than marriage are outdoors of the clubbing provisions however the threshold of fifty thousand rupees will apply as she is a non-relative until she will get married so present to daughter in regulation by dad and mom in regulation will not be suggested. It could also be famous that the clubbing provisions will proceed to use on the worth of the present even after the asset gifted adjustments its kind. So for instance in case jewelry is presented to daughter in regulation by dad and mom in regulation, although absolutely tax free within the palms of the bride on the time of marriage however the capital positive factors if any realised on the time of sale must be clubbed with the revenue of the donor as and when the jewelry is bought in future.
Precautions whereas accepting marriage items
Though items obtained on the event of 1’s marriage is absolutely tax free however it’s good to take sure precaution earlier than you report these present in your data specifically in case the items are of excessive worth.
So in case you’ve proven some quantities or property as having been obtained on the event of your marriage, you’ll have to furnish the small print of all of the individuals from whom you’ve obtained the items. Moreover, the tax official might name the particular person to look earlier than him and should attempt to discover about genuineness of the present. The tax regulation gives that in case you aren’t in a position to give a passable rationalization in respect of any asset discovered credited in your books of accounts, the tax division will levy a flat tax @ 60%+surcharge as a substitute of the identical being taxed on the slab fee relevant to you. You must pay curiosity and penalty as bonus in such a scenario.
In case you might be planning to make use of the event of marriage in your loved ones for cash laundering, please watch out. In case the items obtained and recorded within the books come to the discover of the tax official throughout evaluation continuing the tax officers can ask you to furnish the small print of marriage bills incurred with the small print of the one who had footed the invoice. Moreover, so as to gauge the dimensions of bridal ceremony, the officer can ask for the video recording and {photograph} of assorted features of the wedding. So look earlier than you leap.
I’m positive the above dialogue has been helpful to you.
Balwant Jain is a tax and funding skilled and could be reached on [email protected] and @jainbalwant his twitter deal with.
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