With the wedding season on in full swing, you can expect a lot of gifts – after all, that, is every Indian uncle and auntie’s way of showering you with blessings. But this Shaadi season, gifts are taking a different route. What with the onset of demonetization and India on the road to a cashless economy, gifts (read: monies) are being transferred to bank accounts using net banking. While the idea sounds appealing, you might want to consider the implications of gifts. That’s right folks, your wedding ‘gifts’ are subject to a gift tax.
Let’s give you a quick background on what’s gift tax:
The Gift Tax is adhered to under the Gift Tax Act of 1958 and is applicable to every state in India barring Jammu and Kashmir. Under this act, gifts in excess of Rs. 25,000, in the form of cash, draft, cheque or others, received from one who doesn’t have blood relations with the recipient, were taxable. This act was demolished in 1998 (yay!) but made a comeback in 2004. A new provision was introduced in the Income Tax Act 1961 under section 56 (2). According to it, the gifts received by any individual or Hindu Undivided Family (HUF) in excess of Rs.50,000 in a year would be taxable.
So what is taxable?
Gifts up to INR 50,000 are exempt from any taxes but you must remember that the aggregate value of the gift mustn’t cross INR 50,000 – so if all of your friends or family gift you INR 50,000 each – you are liable to pay tax.
For those tying the knot, you can breathe a sigh of relief, because you’re exempt from taxes on gifts received at your wedding. But do not that this on applicable to an individual’s wedding – gifts received on a sibling’s wedding (but transferred to your account) will be taxable.
Parent’s get very generous as they get older and a lot of children tend to inherit property from their parents (or maybe a favourite aunt). Tax (and a heavy one at that) is applicable to properties acquired as gifts (exempted if inherited under a will and/or due to the death of the property holder) – inheriting a property applies that you will have to pay the difference between the part payment made and the stamp duty value (provided the stamp duty value exceeds INR 50,000). Additionally, a property isn’t limited to real estate – this is also applicable to jewellery, paintings, works of art etc.
But wait, there are exceptions:
Gifts are exempted from gift tax in the following cases:
The gift was given by a blood relative, irrespective of the gift value or is an immovable property located outside the country and gifts received under a will.
Author : Divita Gupta
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