Income Tax on Marriage Gift: Taxation of Wedding Gifts Received Under Section 56

What are the taxation rules for wedding gifts?

Tax on Wedding Gifts

The gifts newlywed couples receive from their immediate family members on the occasion of their marriage are not taxable in India. These gifts can be in any form, such as a house, property, cash, jewelry, stock, etc., and are exempt from taxation. Immediate family members include parents, siblings, or siblings’ spouses. This rule is stated under Section 56 of the Income Tax Act.

For example, If your parents send Rs.10 lakh to your bank account as a wedding gift, it will not be taxable.

The exemption includes movable and immovable gifts such as cash, property, stocks, jewelry, automobiles, electronics, artifacts, and even immovable presents such as land or a house. According to Section 56 of the Income Tax Act, 1961, any gifts received by an individual during a financial year, with a total value exceeding Rs. 50,000, are considered taxable as income from other sources. There are certain exceptions to this clause; we have mentioned these exemptions in the exempt gift category, and gifts received at a wedding are one of them. Newly-wed couples should keep a record of all their wedding presents, including high-value gifts like houses or cars, and maintain them as part of their regular documentation showing their assets.

Note:- Even though the wedding gifts themselves are exempt, one should keep records of the gifts received, especially for high-value items.

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Clubbing Provision for Gifts Received at Wedding

Although gifts received by a bride and groom during their marriage are entirely tax-free, it's essential to consider certain clubbing provisions if these gifts come from specific relatives. If a daughter-in-law receives a gift from her father-in-law or mother-in-law, the income arising from that gift needs to be added to the income of the in-law who gave the gift.

However, gifts given to a daughter-in-law before marriage are exempt from clubbing provisions. It's worth mentioning that even though these gifts are outside the clubbing provisions, caution should be exercised if the value exceeds fifty thousand rupees, especially when she is a non-relative until marriage. Therefore, it's not advisable for parents-in-law to gift substantial amounts to their daughter-in-law before marriage.

It's crucial to be aware that clubbing provisions persist even if the gifted asset undergoes a change in form. For instance, if a valuable painting is gifted to a daughter-in-law by parents-in-law during the marriage, resulting in complete tax exemption for the bride, any capital gains realized upon the future sale of the painting will be clubbed with the income of the donor at the time of sale.

Do you earn income from gifts given by your friends and relatives? Are you unsure about how to pay taxes on them? If so, our Tax Advisory Service can help you understand the tax rules and implications on your gift income.

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What are the different types of wedding gifts?

Gifts received at the wedding are exempt from taxation. The gifts received can be cash, property, jewelry, electronics, movable or immovable property, and so on.

Let us learn more about the term property, which includes the following:

• Land and building (immovable)
• Jewelry (Jewelry includes ornaments or utensils made of gold, silver, platinum, or any other precious metal, whether or not attached to any precious or semi-precious stone)
• Shares and securities (Securities Include debentures, bonds, etc.)
• Bullion (Gold And silver in their purest form)
• Drawings
• Archeological collection
• Paintings
• Sculpture
• Any work of art

Marriage Gift Tax Exemption

Any gift received with a value up to Rs 50000 in one year is not taxable.
Any sum of the amount received as a gift from the following without consideration is also not income :

• Gift Received from Relative
  Any sum of money or kind received as a gift from relatives will not be taxable. No limit is specified for the number of gifts received by relatives; hence, any amount received by relatives is not taxable. For example:
  • If your brother gives you Rs 50,00,000, it will not be taxable.
• Gift received On the occasion of the marriage of the individual
  The gift received by the wedding couple (without limit) on the occasion of the marriage is tax-free in their hands.
  For example, If your friend, relative, or any other person gifts you on your marriage, nothing will be taxable:-
• under a Will or by way of inheritance;
• in contemplation of the death of the payer;
• from a local authority as defined in Explanation to section 10(20);
• educational or medical institution or fund, etc., referred to u/s. 10(23C);
• trust or institution registered u/s. 12AA.
• 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
• by way of transaction not regarded as transfer under clause (i) or [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
• from an individual by a trust created or established solely for the benefit of a relative of the individual.

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What is the concept of relatives according to the Income Tax Act?

The “relatives” term is defined by the Income Tax Act as follows :

• Spouse of the individual
• Brother or sister of the individual
• Brother or sister of the spouse of the individual
• Brother or sister of either of the parents of the individual
• Any lineal ascendant or descendant of the individual
• Any lineal ascendant or descendant of the spouse of the individual
• Spouse of the person referred to in clauses (ii) to (vi).
• In the case of a Hindu undivided family, any member thereof;

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What is Accrued income from gifts?

Any income generated from the gifts received on the occasion of marriage is 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.

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Penalty for Non-Disclosure

Failing to report taxable gifts on your income tax return can result in a penalty of up to three times the amount of tax owed on those gifts. To avoid this penalty, be sure to disclose all gifts exceeding Rs. 50,000 in a financial year that is taxable under Section 56(ii) of the Income Tax Act.

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New Bill To Charge Tax On Weddings

The Marriages (Compulsory Registration and Prevention of Wasteful Expenditure) Bill 2016 aimed to curb excessive spending on weddings. The bill proposed a limit on the number of guests and dishes served at weddings to control lavish expenditures. Additionally, it suggested that those who spend more than ₹5 lakh on their weddings should contribute 10% of the excess amount towards the weddings of underprivileged girls. These contributions would be collected into a government-established welfare fund specifically for this purpose. However, this bill hasn't been implemented yet.

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