Tax on Gifts in India

The Parliament of India introduced the Gift Tax Act in 1958, and gift tax is essentially the tax charged on the receipt of gifts. The Income Tax Act states that gifts whose value exceeds Rs.50,000 are subject to gift tax in the hands of the recipient.

Gifting is one of the many ways to express love and affection. It is a custom to gift your closed ones during occasions especially in India. But did you know the gifts are taxable?

As per the Income tax act of 1961, if the value of the gift exceeds Rs.50,000 then the gift is taxed as income in the hands of the person who receives the gift.

What is Gift Tax?

Gift tax is a act introduced by the Parliament of India in 1958. It was introduced to impose tax on giving and receiving gifts under certain circumstances which is specified under the act. These gifts can be in any form including cash, jewellery, property, shares, vehicle, etc.

Gift Tax on Transfers:

The gift tax is also applicable on certain transfers that is not considered as a gift. The transfer of existing movable or immovable property in money or money’s worth qualifies for gift tax.

Gift Tax Exemptions

Though gift tax is applicable on gifts whose value exceeds Rs.50,000, the gift is exempted from tax if it was given by a relative. The income tax rule specifies who can be considered as a relative and the list is mentioned below.

  • Parent
  • Spouse
  • Siblings
  • Spouse’s siblings
  • Lineal descendants
  • Lineal descendants of the spouse

There are several other situations where the gifts can be exempted from tax. Listed below are other situations in which the gift will be exempted from tax.

  • Gifts received during weddings are usually exempted from tax.
  • Gifts received as part of inheritance is exempted from tax.
  • Cash or rewards received by local authorities or educational institutions on the basis of merit is exempted from tax.

Gift Tax FAQ's

  1. Are Gifts Received by a Minor Taxable?

    Gifts received by a minor will be taken into consideration and will be clubbed with income if both the parents are earning taxable income. It will be clubbed with the parent who is earning the highest income.

  2. Are Gifts Received by a NRI Relative Taxable?

    Gifts received by a NRI relative is exempted from gift tax.

  3. Is Gift from a Spouse Exempted?

    Gifts from a spouse is usually exempted from gift tax but the income earned from the gift (if any) will be clubbed with the individual’s income and taxed.

  4. What about the Income Earned from a Gift?

    According to Income Tax rules, income earned from a gift will not be exempted from tax and will be treated as individual income and will attract tax.

News about Gift Tax

  • Gifts that you get is now tax-free up to a limit

    You will have to pay taxes on the gifts you get if the value of the same is more than Rs.50,000. Gifts valued up to Rs.50,000 are tax free. If the amount is over the limit, then the entire amount of your gift will be taxable. For example: if you get Rs.55,000 as gifts during this financial year, the entire Rs.55,000 is taxable under ' income from other sources.'

    18 November 2020

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