As soon as the festive season arrives, the gift-giving season begins. People receive many gifts from friends, relatives and family members which convey messages of love and good wishes. But did you know that tax rules also apply to these gifts? It is important for you to understand the tax provisions for gifts. It is important to understand how gifts are taxed and under what circumstances they are exempt.
Gift tax basic rules – section 56(2)(x)
According to Section 56(2)(x) of the Indian Income Tax Act, any individual or Hindu Undivided Family (HUF) who receives money, property or other things as gift shall be taxed as “income from other sources”. This means that certain types of gifts are included in income and tax is imposed on them.
Tax on monetary gifts
A person is required to pay tax if he receives a gift worth more than Rs 50,000 in a financial year. However, gifts from siblings, parents, children and spouse are tax-free.
Tax on gifts received by non-relatives
Gifts received from people other than friends and relatives are taxable. As per regulations, tax will be imposed on it if its total value exceeds Rs 50,000. Friends are not considered relatives for the purpose of income tax and therefore gifts worth more than Rs 50,000 received from them will be taxed.
Duty-free gifts for special occasions
Gifts received on certain special occasions, such as weddings or inheritances, are not taxable. Such gifts are completely tax-free as they relate to special occasions in life.
Which gifts are taxed?
According to the Income Tax Department, assets brought under the ambit of tax include stocks, jewellery, gold and silver items, art, antiques and virtual digital assets such as cryptocurrencies and NFTs. If the market value of these gifts exceeds Rs 50,000, they are deemed taxable.
Property tax rules?
If a person receives land or house as a gift and its value exceeds Rs 50,000, then it will also be taxed. But if the property is acquired from a close relative, it will still be tax-free.
Tax rules for gifts or coupons received from companies
Gifts, coupons or bonuses received from companies up to Rs 5,000 are tax-free. But if this amount exceeds Rs 5,000, then it is considered as taxable income under your salary. Everyone should know these tax rules for gifts received during holidays and special occasions. Without this information, you could get into tax problems without even realizing it. So next time you receive a gift, remember its value and origin.
