Income Tax on Marriage Gift: Taxation of Wedding Gifts Received Under Section 56
Any gift received by newly wed couples or individuals on the occasion of their marriage is exempt from taxation. Marriage is not just a function but an occasion full of gifts and presents for the couple. Each newly wed couple should be aware about the taxation policies regarding these gifts. In this article you will get to know complete knowledge regarding wedding gifts and their taxation under Section 56.
What are the Taxation rules on wedding gifts?
The gifts received by the newly wed couple from the immediate family or relatives are not taxable in India. The gifts can be in the form of house, property, cash, jewellery or stock or more are exempt from taxation. This rule is stated under Section 56 of the Income Tax Act.
For example: If your friend or family members or relatives or any other person gifts anything on the occasion of your marriage then it will not be taxable.
What are the different types of wedding gifts?
Gifts received on the wedding regardless of their value are exempt from taxation. The gift must be received from family members, relatives or friends. The gifts that are received can be in the form of cash, property, jewellery, electronics, moveable property or immovable property and so on.Let us learn more about the term property which includes the following:
- Land and building (immovable)
- Jewellery (Jewellery includes ornaments or utensils made of gold, silver, platinum or any other precious metal whether or not attach any precious or semi-precious stone)
- Shares and securities (Securities Include debentures, bonds etc)
- Bullion (Gold And silver in their purest form)
- Archeological collection
- Any work of art
The gifts are divided in two head:
Any gift received with value upto Rs 50000 in one year is not taxable.
Any sum of amount received as gift from following without consideration are also not income :
i. Gift Received from Relative
Any sum of money or kind received as a gift from relatives will not be taxable at all means there is no limit specified for amount of gift received by relative hence any amount received by relatives is not taxable For example :
If your brother gives you Rs 50, 00,000 then it will not be taxable.
ii. Gift received On occasion of the marriage of the individual
Gift received by any person (without limit) on the occasion of the marriage is tax free in the hands of the individual.
For example: If your friend or relative or any other person gifts you on your marriage then nothing will be taxable.
iii. under a Will or by way of inheritance;
iv. in contemplation of death of payer;
v. from local authority as defined in Explanation to section 10(20);
vi. educational or medical institution or fund etc. referred to u/s. 10(23C);
vii. trust or institution registered u/s. 12AA.
viii. by any fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10; or
ix. by way of transaction not regarded as transfer under clause (i) or 11[clause (iv) or clause (v) or] clause (vi) or clause (via) or clause (viaa) or clause (vib) or clause (vic) or clause (vica) or clause (vicb) or clause (vid) or clause (vii) of section 47; or
x. from an individual by a trust created or established solely for the benefit of relative of the individual.
What is a Taxable gift?
When any amount received as gifts exceeds Rs 50000 (from other than specified relatives) than whole received amount will be taxable or
Any immovable property is received without consideration if stamp duty value of such property is more than Rs.50000/- than stamp duty value of such property will be taxable.
If consideration is paid 120000 and stamp duty value is 200000 then 80000 will be chargeable under the head of other sources.
If any movable property is received without consideration of which aggregate fair market value is more than Rs.50000/- then tax will be charged on aggregate fair market value of movable property.
If any Gold Jewellery received of value Rs 1050000 for consideration 200000 then the whole 850000 will be taxable in the hands of the recipient.
Gifts received from immediate family
The gifts from immediate family such as parents, spouses, siblings are exempt. For example if your parents gift you Rs 10 lakh in your account as a wedding gift, it will not be charged with any tax as they are your lineal ascendants.
What is the concept of relatives according to the Income Tax Act?
The “relatives” term defines by the Income Tax act as follows :
- i. Spouse of the individual
- ii. Brother or sister of the individual
- iii. Brother or sister of the spouse of the individual
- iv. Brother or sister of either of the parents of the individual
- v. Any lineal ascendant or descendant of the individual
- vi. Any lineal ascendant or descendant of the spouse of the individual
- vii. Spouse of the person referred to in clauses (ii) to (vi).
- viii. In case of a Hindu undivided family, any member thereof;
Gifts received from relatives and friends
The gifts that are received from others who are not relatives exceeds the monetary value of Rs 50,000, it will be charged .
For example if your friends give you gifts of value Rs 35000, it will not be charged with any tax.
But if few other gifts are received worth Rs 20000, the total monetary value will be 55000. Now this will be charged based on the slab under the head income from other sources.
However wedding gifts are not taxable regardless of the sender. Only if the immovable property is presented by unrelated individuals, the stamp duty will attract tax up to Rs.50,000.
Regulations regarding gifts to be presented on marriage
In the case of a gift in the form of cash, the newly wed should deposit the money in a bank account on the dates around the date of the wedding.
Gifts of high value such as house, car and so on should be gifted with a gift deed with a date mentioned around the date of the wedding.
The newly wed couple should keep a record of the gifts of high value such as jewellery that shows the asset they hold.
What is Accrued income from gifts?
Any income generated from the gifts received on the occasion of marriage are subject to tax.
For example a couple received a house property as a wedding gift and they let out the property on rent. The income earned with this rent will be taxable. Also if the couple sells the property in the future, the capital gains that will be generated will be taxable.
New Bill To Charge Tax On Weddings
Recently a new bill maned as The Marriages (CRPWE) (Compulsory Registration and Prevention of Wasteful Expenditure) Bill, 2016, is passed by the Lok Sabha in which the wedding functions will be keenly observed. The Bill was implemented by a Member of Parliament of the Congress, Mrs Ranjeet Ranjan. This is done to completely cover the number of dishes and guests so that the total expenditure done in a marriage is suspected. The number of dishes served and number of guests invited is yet to be fixed by the government. This will help in checking the show of wealth of the people. The regulations in this bill includes that if in any marriage people will spend above Rs 5 lakh , they will have to contribute 10% of the amount towards the wedding of poor girls.
The main aim of passing this bill is to prohibit lavish spending on weddings and keeping this occasion simple. This is to stop people who turn this occasion into an exhibition of their wealth and not a solemn occasion. This also creates a social pressure on others for excess spending even those who cannot afford to spend a lot.
The amount that will be contributed by the families for poor girls will be collected in a welfare fund to assist the marriage of poor girls that are under the poverty line.
Any sort of gift that is given on the occasion of wedding from immediate family gifts are not taxable under the Income Tax Act. If the gifts are from unrelated people, friends the maximum limit of the value of the gifts is Rs 50,000. After this limit the gifts will be taxable as per the slab.
Frequently Asked Questions
Q- Are gifts on the occasion of a wedding taxable?
No, the gifts received by the newlyweds on the occasion of wedding are not taxable.
Q- What is the maximum limit that will not be taxable in terms of gifts in marriages?
The gifts received of value exceeding Rs 50000 from unrelated individuals, friends or others will be taxable.
Q- If any income is accrued from the gifts received, will it be taxable?
Yes if the individual receives income from the gifts he or she got, the income will be taxable.
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