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It's that time of year when Christmas bell rings and countdown to New Year starts. With the advent of the holidays, Christmas and New Year hardly a week apart, it's time for togetherness and exchanging gifts with the loved ones. But nothing is free in life; even Santa Claus comes with a Clause.
Certain gifts are taxable under Income Tax Act,1961. As per the Income Tax Act, if you receive gifts valuing more than Rs. 50,000 during the year then tax will be levied on such gift amount in the hands of the receiver. The Gift can be in any form like cash, bank, jewelry, immovable property,securities or any other precious items. So if you receive Rs. 25,000 as a gift from a friend, it's not taxable but if you receive another Rs. 30,000 from one more friend then whole amount, i.e. Rs. 55,000 will be taxable as the total amount is more than Rs. 50,000.
Fortunately, Income Tax is not so relentless on the gifts received from relatives. But a question arises who comes under the ambit of relatives. Can I call my best friend my relative or what about my uncle's son?
Income Tax defines the word relative and includes the following:
So, even if you receive gifts from the above persons for more than Rs. 50,000 during the year, it won't be taxable.
If you are lucky enough to receive an immovable property (being a capital asset) as a gift from your loved one for a consideration that is less than the property’s stamp duty value by an amount exceeding Rs. 50,000/- then you have to pay tax on the difference between the stamp duty value and the consideration. However, if it is from the relative, then no tax implications.
Also, in the following cases, gifts received by you are exempt and you need not bother about its tax implications.
We advise you to keep a full proof documentation of all the gifts received by you during the year. Take gifts; present gifts; but just make sure that you don't breach the limit of Rs. 50,000. Further, where you are receiving gifts on the occasion of marriage or from relatives; pen it down so that you can "gift" those documents to your Assessing Officer at the time of assessment of your Income Tax Return.
Here's to wishing you and your loved ones a very Merry Christmas and Joyful New Year.
