In this blog post I will be writing about the Income Tax rules related to the Gifts received by a person. There is many rules on receiving the Gifts based on the gifts nature and from whom the person has received the gift. The Income Tax Act 1961 has made change to the rules in 1st April 2006. We will look into the recent rules in this blog.
Not only the income, if a person receives a gift, if the value of the gift is exceeding the certain limit then he must add it in his income and pay the income tax. There are certain exceptions on declaring the gifts as income. This blog explains it in detail. If you have any doubts, please post it in the comments section. Subscribe to our future articles here.
Gifts received From Relatives
As per the Income tax act, the Gifts received from any of your relatives are fully exempt from tax. Whether you are received the gifts as Cash, Cheque or any goods. You are not liable to pay the tax for these gifts. Here the “relatives” term defines 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).
For example if you are receiving gift of Rs.100000 from your uncle ( your mother’s brother), it is fully exempt from the Tax. Whenever you get the gifts please apply the relations in the above list to ascertain whether you are liable to pay any tax for the received gift.
Gifts received From Non-Relatives
Here non-relatives means anyone who doesn’t come under the above mentioned relation for you. In this case you are tax exempt up to maximum of Rs.50000 for a financial year. If you receive the gift worth more than Rs.50000, you are liable to pay the tax what ever you received excess of the limit. This rule applies when the gift is a sum of money, whether in cash, by way of cheque, bank draft or any articles which is value more than the Rs.50000.
For example you are receiving a gift of Company Shares from one of your team mate in your company or when you are receiving a gift of Rs.100000 (cheque) for the best performing in your company (not a bonus), Rs.50000 is liable to pay tax.
One very happy feature of the provision of taxation of gifts is that any gift received from any person on the occasion of the marriage of the gift’s recipient would not be liable to income tax. There is no monetary limit attached to this exemption. Note that, if you receive any gifts at the time of engagement or the marriage anniversary if liable to pay the tax.
Special Tax Exempt gifts
The following list of gifts are fully exempted from Tax whether the it is received as Cash, or any other form of the material doesn’t affect the exemption.
- Gift received under a Will or by way of inheritance
- Gift in contemplation of death of the donor;Gift from any local authority
- Gift from any fund or foundation or university or other educational institution or hospital or any trust or any institution referred to in Section 10(23C)
- Gift from any trust or institution, which is registered as a public charitable trust or institution under Section 12AA
I hope this blog provides you enough information how to calculate the tax for your gifts. So, when ever you are receviving the gifts, please be careful if you are liable to pay the tax. Thanks for reading this post!!!
If you have any doubts, please post in the comments area so that I can answers all the questions.
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