Exchanging presents is a key a part of festivals in India. From money presents to gold and silver cash, all represent gifting choices throughout Dussehra, Dhanteras and Diwali.
However, many usually are not conscious that presents can entice tax. Under Section 56(2) of the Income Tax Act, presents obtained throughout the 12 months are taxed as per the slab price beneath ‘income from other sources’.
Tax guidelines for gifting differs as per the character of the reward and from whom it’s obtained.
Which presents are taxed?
You are required to pay taxes on presents if the combination worth of all presents obtained throughout a 12 months exceeds ₹50,000. If the combination quantity is ₹50,000 or much less, it’s tax-free, nevertheless, if the whole worth exceeds the brink even by a rupee, all the quantity is taxed. For occasion, when you have obtained presents value ₹51,000, all the sum will probably be taxed as per the relevant price. In the case of money, any sum obtained with out consideration is handled as a present. Without consideration implies that the merchandise is transferred purely as a present or donation, with no receipt or promise of cost, service or good of worth in alternate of the mentioned merchandise. For immovable property, when it’s obtained with out consideration, its stamp responsibility is chargeable to tax, whereas when the property is transferred with insufficient consideration, stamp responsibility worth exceeding consideration is taxed.
In the case of jewelry and shares, the honest market worth of such objects is chargeable to tax.
Exemption in tax
You can get an exemption on tax on presents relying on whom are you receiving it from. According to the I-T Act, presents obtained from kinfolk are exempt from tax.
Donee’s partner, brother or sister, brother or sister of the partner, brother or sister of both of the dad and mom or parents-in-law, any lineal ascendant or descendent, any lineal ascendant or descendent of the partner, partner of the individuals referred above all qualify as kinfolk as per the I-T Act.
Gifts obtained from any of those individuals, regardless of the character and worth of the reward and the event when the presents are transferred, are exempt from tax.
Since associates usually are not thought of kinfolk, presents from them are taxed. However, presents given on the event of wedding ceremony or transferred beneath a Will or inheritance are exempt from tax when obtained from any individual and never simply kinfolk.
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