Christmas and New Yr presents might be taxable

If the total value of gifts from friends, including those on Diwali, during a financial year is more than  ₹50,000, then it is counted as income from other sources and taxed according to your tax slab. Photo: iStock

MUMBAI: It is good to have an employer who’s beneficiant and affords presents on events similar to Diwali, Christmas, or New Yr. However costly presents out of your firm additionally means you will have to pay tax on them. If the worth of a present from the employer is above 5,000, it might be taxed as perquisite.

The restrict of 5,000 will not be for every present. As a substitute, the worth of all presents mixed shouldn’t be over 5,000 in a monetary 12 months for them to stay tax-free. Some firms deduct perquisite tax and deposit it with the authorities. If the employer would not do it, the worker might want to pay tax beneath the top “salaries” when submitting revenue tax returns.

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However what if you happen to obtain an costly present from a enterprise acquaintance? There may be some reduction in such circumstances, in keeping with chartered accountants. “The part that offers with taxation of presents within the Revenue-Tax (I-T) Act, specifies gadgets which can be taxable when an individual receives them in private capability,” stated Naveen Wadhwa, deputy basic supervisor, Taxmann.com.

However there is a restrict right here, too. The whole worth of presents that you just obtain from anybody apart from shut household shouldn’t be over 50,000. As soon as the mixed worth of all presents cross 50,000, they are going to be taxable.

So, if a salaried particular person acquired a cell phone, for instance, he will not have to pay tax on it as such devices are usually not coated beneath Part 56 of the I-T Act. The part specifies seven gadgets which can be taxable. They embrace drawings and work, sculptures, any murals, archaeological collections, shares and securities, immovable property, and jewelry.

If an individual receives any of the desired gadgets as a present, he might want to discover the gadgets’ honest market worth and provide them for tax beneath the top “revenue from different sources”.

For professionals, guidelines differ. Legal professionals, medical doctors, inside decorators, chartered accountants may find yourself paying tax on presents from purchasers and enterprise acquaintances. Usually, tax authorities would take a name that the presents had been acquired in an expert capability.

“Any worth or profit or perquisite, whether or not convertible into cash or not, arising from enterprise or the train of a occupation can be taxed,” in keeping with the laws. Authorities do not wish to go away any loopholes that people can exploit to cut back their tax outgo. There might be a chance that some professionals can ask for fee of the charge within the type of a present if it’s not taxed.

What ought to professionals do in such a case? Chartered accountants counsel that it is best to pay tax on any costly present they obtain. For this, they would want to think about the honest market worth of the present and add the worth to their enterprise revenue. They need to do that except they will explicitly present that the present acquired was in a private capability.

Presents are usually not taxable if an individual receives them from a detailed relative, irrespective of how costly. The Revenue-Tax Act specifies who’re thought of as shut family members for the aim of taxation and so they embrace mother and father, partner, youngsters, and siblings.

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