Blissful Diwali 2021! Know the way a lot money you possibly can take as present with out paying earnings tax

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Earnings tax on Money Diwali Present: Is it clever to share money as a present on Diwali? And, are there any tax implications on sharing money as a present? Know a lot money you possibly can obtain with out tax implications

Sharing presents is part of Diwali celebrations. From items and gold to sweets and snacks, we prefer to share all forms of presents with our family members.

However what about money? Is it clever to share money as a present on Diwali? And, are there any tax implications on sharing money as a present. As you have a good time the pageant of lights, FE On-line talked to Dr Suresh Surana, Founder, RSM India, to search out solutions of those queries. Have a look:

How a lot money can an Particular person obtain as present on Diwali with out drawing taxmen’s ire?

As per the provisions of Part 56(2)(x) of the Earnings Tax Act, 1961 (‘IT Act’), if mixture sum of cash acquired by a person exceeds Rs. 50,000 as a right throughout a specific Monetary Yr, then such sum shall be chargeable to tax below the pinnacle ‘Earnings from Different Sources’.

In easy phrases, if a person receives money both from one or a number of individuals, and the combination worth of such receipt exceeds Rs. 50,000 throughout a specific monetary 12 months, such quantity might be taxed on the slab charges relevant to that particular person.

For the reason that threshold restrict is relevant for a specific 12 months, a certain amount that an Particular person can obtain as Diwali present with out drawing taxmen’s ire can’t be particularly said as a result of one want to judge the presents acquired throughout different festivals as properly.

ALSO READ | Earnings Tax on Diwali, Dhanteras 2021 pageant presents: Right here’s all you’ll want to know

Nevertheless, to keep away from tax, the prima facie situation is that, the combination money acquired as presents mustn’t exceed Rs. 50,000 in a monetary 12 months.

It’s also pertinent to notice that, if an worker receives any Present in Money from his/her employer, then the entire quantity acquired as present (even when it doesn’t exceed Rs. 50,000) shall be taxable below the pinnacle ‘Earnings from Wage’.

Is it clever to provide money as a present on Diwali from the earnings tax perspective? If not, then what are the opposite choices?

It is dependent upon particular person selections and money present even when opted to obtain, whether it is throughout the general restrict as laid out in Query 1 above, wouldn’t have any tax implications.

Is money present from father taxable?

The IT Act explicitly states that the provisions of Part 56(2)(x) won’t be relevant if a person receives presents from any of his/her relations. Additional, the time period “relations” within the case of a person is outlined as:

(A) partner of the person;
(B) brother or sister of the person;
(C) brother or sister of the partner of the person;
(D) brother or sister of both of the mother and father of the person;
(E) any lineal ascendant or descendant of the person;
(F) any lineal ascendant or descendant of the partner of the person;
(G) partner of the particular person referred to in objects (B) to (F);

The Father of a person is the lineal ascendant. Thus, money present acquired by a person from his/her father is totally exempt even when it exceeds Rs. 50,000 in a 12 months.

Is money present from associates taxable?

Sure. The IT Act doesn’t explicitly exempts money presents acquired by a person from associates because it does within the case of relations. Thus, the identical might be chargeable to tax if the combination receipt in a FY exceeds Rs. 50,000.

Who has to pay tax on presents – the one that receives the present or the one that provides the present?

In line with the provisions of Part 56(2)(x) of the IT Act, the one that receives the present is liable to pay tax on it.

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