Introduction
In India during festive periods a lot of gifts are exchanged among family members, friends etc. Getting and giving gifts are quite usual during the festivals. This is the way Indians show their love and compassion among themselves. Did you get any gifts during the ongoing festive season? In this write up, we will be touching upon the taxes on gifts during the festive season. Gifts can easily warm the cockle of your hearts but they come with certain strings attached. You have to report any income apart from salary (like a gift, the bonus from the employer, prize, lottery etc) to the taxation department in your IT Returns. Several taxpayers generally confront problems while filling particulars of such receipts in ITR. This write up can easily clear any such confusion.
How Gifts are taxed?
The Income Tax Act 1961 clarifies every kind of receipts as personal earnings and the same holds true for gifts as well. In case the value of the gifts you get in a fiscal year goes beyond Rs 50,000, the amount comes under the ambit of taxation. The gifts could be of any kind- jewellery, cash, shares, movable/immovable property etc. If you have got any gift (in cash or kind), it has to be reported in the ‘income from other sources’ section in your IT Returns. Such receipts will be levied cess according to the tax slab relevant to you. This apart, 4% of cess will be levied on them. There is no provision of allowance or deduction (u/s 80 C or 80 D) on such an income.
Tax-free Gifts
But, one important thing you need to look into. The above-given regulation is not applicable if you get the gifts from your relative as presents. However, this does not imply that you can address the ‘giver’ as your relative even if he or she happens to be not. To clear the air, there are Income Tax rules that clarifies relatives from whom you can take ‘tax-free’ gifts. These include:
Parents
Spouse
Brothers and sisters of you/ your spouse
Brothers and sisters of your parents
Straight descendants of you/ your spouse
Consider these as well
Assuming that you got a car from your relative for your wedding. It is essential to ensure that the date specified in the gift deed is the date of your marriage or a date in close proximity. Any gift you get due to inheritance (or via a will) cannot be taxed. But, if you happen to produce any rental or other income out of such a gift (property or house), the same can be taxed under the section ‘income from other sources’.