Income Tax Rules for Diwali Gifts : On the occasion of Diwali or Dhanteras, we all like to give gifts to our family members and close ones. We not only give sweets to relatives and close ones but also give expensive gifts like cash, gold and silver. However, most of us do not know that some gifts are subject to tax. If you also get expensive gifts on the occasion of Diwali, then you need to be careful or else your income tax burden may increase. As per section 56(2) of the Income Tax Act, gifts received in a financial year can be taxed as ‘income from other sources’ at the slab rate. Here we have explained the tax levied on gifts received during festivals or during any financial year.
What type of gift is taxed
Not all gifts are taxed. Whether tax will be levied or not depends on the type of gift and who has given it to you. Different rules have been made for all these. Gifts which are received in the form of cash and without any consideration are liable to tax. Without any consideration, it means that you are not giving anything to the giver of the gift.
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According to Archit Gupta, Founder and CEO, Clear, gifts such as jewellery, bullion, sculptures, paintings, etc. are taxed if their Fair Market Value (FMV) exceeds Rs 50,000. Gupta told FE Online, “Taxability is determined on the basis of stamp duty value for immovable property and fair market value. A gift without consideration, where the stamp duty value in the case of immovable property and the FMV in the case of movable property exceeds Rs.50,000, such stamp duty value or FMV is charged to tax on the recipient.” The Income Tax Act states that gifts received in the form of cash from an employer are fully taxable to the employee.
Which type of gift is not taxed
The Income Tax Act 1961 has given tax exemption in respect of gifts received from relatives. Gupta said that according to the Act, the word ‘relative’ can be defined as husband or wife, brother or sister, brother or sister of husband or wife, brother or sister of parent or mother-in-law, any descendant of husband or wife. is defined on. This means you will not have to pay any tax if you receive gifts from parents, brother and his wife, sister and her husband, wife/husband and children and their spouses in your family. However, gifts received from any person, including friends, are taxed if the value exceeds Rs 50,000.
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Gift received on the occasion of marriage is not taxed
Interestingly, there is no tax on gifts received on the occasion of marriage or gift received as inheritance. Gupta said, “Irrespective of the giver of the gift, if the gift is given to the recipient on the occasion of their marriage or the gift is transferred by way of inheritance or will, then no tax is levied on it. ” If the employer makes a gift in kind to his employee, the gift is taxable only if its value is Rs.5,000 or more.
(Article : Rajeev Kumar)
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