Acquired money, gold as Diwali items? Examine revenue tax implications  |  Photo Credit score: iStock Photos
New Delhi: Exchanging items through the festive season is extraordinarily widespread in India. Nevertheless, not many individuals are conscious that items acquired through the festive season could also be topic to taxation.
Word that not all items are taxed and tax guidelines differ relying on the character of the reward and from who it’s acquired. If the mixture worth of all items acquired throughout a 12 months exceeds Rs 50,000, then will probably be taxable as per revenue tax guidelines. Each financial and non-monetary items could be included within the restrict of Rs 50,000.
Nevertheless, one ought to concentrate on the truth that receiving sure items throughout this festive event could result in an extra tax legal responsibility for you. Based on tax and funding knowledgeable Balwant Jain, items acquired through the 12 months are taxed as per the slab fee of the donee underneath ‘revenue from different sources as per part 56(2)(X) of the Revenue Tax Act 1961.
Jain additional stated that each one items are, nonetheless, not taxed and tax guidelines differ relying on the character of the reward and from who it’s acquired. “If the mixture worth of all items acquired throughout a 12 months exceeds Rs 50,000, then will probably be taxable as per revenue tax guidelines,” stated Jain.
Reward taxation guidelines:
1. When the reward is acquired from the employer: In India, most employers supply items to their workers on varied events through the 12 months, akin to Diwali, New Yr, and so on. As per the Revenue Tax Act, if an employer provides any reward voucher in type or money amounting to lower than Rs 5,000 through the monetary 12 months, then it’s totally tax-exempt. Nevertheless, if the quantity of reward exceeds Rs 5,000, then the entire quantity is handled as a part of wage and taxed as a ‘perquisite’, based on one’s tax slab.
2. Presents acquired from kinfolk: Presents acquired from kinfolk are totally exempt from tax with none restrict, supplied such relative comes underneath the definition of the relative for the aim of Part 56(2).
3. Presents acquired from associates and others: Presents acquired from associates can be handled as revenue from different sources and taxed accordingly. Nevertheless, items value as much as Rs 50,000 (both at Diwali or some other pageant) acquired in mixture throughout a monetary 12 months, are exempt from tax.
It’s value including that once you obtain an immovable property as a right it’s handled as a present or donation. It means in return, you aren’t paying something to the donor. In such a case the stamp obligation worth of the property can be thought-about as the worth of the property for taxation functions. Nevertheless, if the property is transferred with insufficient consideration, the stamp obligation worth exceeding the consideration worth is taxed.
4. Tax on property acquired as a present: Whenever you obtain an immovable property as a right it’s handled as a present or donation. It means in return, you aren’t paying something to the donor. In such a case the stamp obligation worth of the property can be thought-about as the worth of the property for taxation functions. Nevertheless, if the property is transferred with insufficient consideration, the stamp obligation worth exceeding the consideration worth is taxed.
As an example, you’ve got paid Rs 10 lakh in trade for a property, whose stamp obligation worth is Rs 30 lakh, then Rs 20 lakh is taken into account as the worth of the reward and you’ll be taxed on that quantity.
Within the case you obtain some money as reward, then the complete sum can be thought-about for arriving on the worth of items acquired by you. Equally, if you happen to obtain any jewelry or shares as reward, then the truthful market worth of such objects is chargeable to tax.
5. Presents exempted from tax: Based on the Revenue Tax Act 1961, items acquired from shut kinfolk are exempt from tax. As per the I-T Act, donee’s partner, brother or sister, brother or sister of the partner, brother or sister of both of the dad and mom or parents-in-law, any lineal ascendant or descendent, any lineal ascendant or descendent of the partner, partner of the individuals referred above all qualify as kinfolk.
Presents acquired from any of those folks, regardless of the character and worth of the reward and the event when the items are transferred, are exempt from tax. Since associates are usually not thought-about kinfolk, items acquired from them can be topic to taxation if the mixture worth of such items cross Rs 50,000 in a monetary 12 months.
Nevertheless, items acquired on the event of wedding ceremony or transferred underneath a Will or inheritance are exempt from tax when acquired from any particular person and never simply kinfolk.