Income Tax on Diwali Festival Gifts, Dhanteras 2021 Received From Parents, Son, Daughter, Friends, Family, Relatives Explained
Income tax rules for gifts received from family and friends: We all love to share gifts with our loved ones on the occasion of Diwali or Dhanteras. Not just candy and candy, we also share gifts in the form of silver, gold and silver.
However, few of us are aware that some of the gifts, if not properly flagged, can attract the wrath of the IRS. According to Section 56 (2) of the Income Tax Act, gifts received during a fiscal year may be taxed at the slab rate as âincome from other sourcesâ. This article explains everything you need to know about the tax implications of gifts received at festivals or on any day of a fiscal year.
What types of donations are taxable?
Gifts received in cash and for no consideration, such as goods or services in exchange, may be taxed.
According to Archit Gupta, founder and CEO of Clear (formerly ClearTax), in the case of in-kind donations such as jewelry, ingots, sculptures, paintings, etc., they are also taxed at their fair market value if it exceeds Rs 50 000..
âIn the case of real estate, if such goods have been received without consideration, the value of the stamp duty is subject to income tax if it exceeds 50,000 rupees. However, if real estate is transferred with adequate consideration, the value of the stamp duty will be taxed if it exceeds that consideration by 50,000 rupees, âGupta told FE Online.
The Income Tax Act states that a cash donation from an employer is fully taxable in the hands of the employee.
What types of gifts are not taxable?
The Income Tax Act 1961 exempted gifts received from relatives.
Gupta stated that by law a parent means the individual’s spouse, siblings, spouse’s siblings, their parents’ siblings, any ascendant or line descendant of the individual. or his spouse, and the spouses of all the above. people mentioned.
This means that you will not have to pay any tax if you receive gifts within the family from your parents, brother and spouse, sister and spouse, wife / husband and children and their spouses.
However, gifts received from any other person, including friends, are taxed if they exceed the limit of 50,000 rupees.
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Interestingly, gifts received on the occasion of a wedding, or those received as an inheritance, are tax exempt.
“The only other exemption for tax-exempt gifts, regardless of the donor, is if the recipient is offered on the occasion of their marriage or if the gift is transferred by inheritance or by will,” Gupta said. .
If the employer gives his employee a gift in kind, the gift becomes taxable only if the value of the gift is Rs 5,000 or more.
Is it compulsory to pay taxes on such gifts?
According to Gupta, gifts in India are taxable if they exceed a certain limit. It also depends on who gives or receives the gift. Are they related to each other?
âSection 56 (2) of the Income Tax Act governs the taxation of donations in India. According to this section, if a person receives a sum of money exceeding 50,000 rupees in total per year as a gift, the entire amount will be taxable for income tax. This means that if a person has received several gifts per year and they exceed 50,000 rupees in total, the total value will have to be declared when filing the tax return for that year, âhe said.
Rs 50,000 is not an exemption limit. So even if you receive a taxable donation of Rs 50,001, the entire amount will be taxed at the applicable rate.
âTaxpayers should keep in mind that 50,000 rupees is not an exemption limit. Therefore, if the gifts even amount to 50,001 rupees in total, the total amount becomes taxable at the applicable tax rate, âGupta said.