Know Earnings tax guidelines on presents obtained on marriage

The gifts received by the couple are fully tax-free without any upper limit. (HT)

It’s customary in Indian for households to change reward on the event of marriage. This text offers with tax implications of such presents obtained.

Common Provisions for taxation of Presents in India

Earlier than abolition of the Present Tax Act in 1998 the donor (giver of the reward) was required to pay reward tax on the worth of reward over Rs. 30,000/-. After the abolition, neither the recipient not the donor was subjected to any tax. This lacuna was grossly misused and which compelled the federal government to herald provisions to tax the presents within the arms of the recipient in case the combination of the all of the presents throughout a 12 months exceeded sure threshold restrict. Presently this threshold restrict is fifty thousand rupees. It’s the mixture worth of all of the presents obtained throughout the 12 months and never the worth of a person reward which is to be taken under consideration for figuring out taxability of the presents.

Particular provisions relevant to marriage presents

Whereas offering for taxation of presents within the arms of recipient, the lawmakers offered sure exceptions. Marriage presents are one of many exceptions offered within the legislation. In India we have now custom the place kin in addition to the bride and groom obtain presents on the event of marriage. Are all these presents coated beneath the wedding exception, and due to this fact tax free? The reply is just no. It’s only the couple getting married who enjoys the exception and never all of the kin. The presents obtained by the couple are totally tax free with none higher restrict. These presents needn’t essentially be from the kin solely to take pleasure in this exemption.

So all of the presents obtained by the bride and groom, regardless of worth, are tax free of their arms however the different kin have to incorporate full worth of the presents of their earnings, whether or not obtained in money or form, in case the combination of worth of all of the presents, together with these presents, obtained throughout the 12 months exceeded fifty thousand rupees. Nonetheless, presents obtained by one relative from one other relative are totally tax-free in case of sure specified kin regardless of any event.

Clubbing provisions

Although presents obtained by bride and groom are totally tax free of their arms on the event of their marriage however some clubbing provisions will come into play if these presents are obtained from sure specified kin. Earnings arising from the reward obtained by a daughter in legislation from her father in legislation or mom in legislation is required to be added to the earnings of the in-law who had given the reward. Nonetheless, in case of presents given to daughter in legislation earlier than marriage are outdoors of the clubbing provisions however the threshold of fifty thousand rupees will apply as she is a non-relative until she will get married so reward to daughter in legislation by mother and father in legislation just isn’t suggested. It might be famous that the clubbing provisions will proceed to use on the worth of the reward even after the asset gifted modifications its type. So for instance in case jewelry is presented to daughter in legislation by mother and father in legislation, although totally tax free within the arms of the bride on the time of marriage however the capital beneficial properties if any realised on the time of sale must be clubbed with the earnings of the donor as and when the jewelry is bought in future.

Precautions whereas accepting marriage presents

Although presents obtained on the event of 1’s marriage is totally tax free however it’s good to take sure precaution earlier than you document these reward in your data specifically in case the presents are of excessive worth.

So in case you’ve gotten proven some quantities or property as having been obtained on the event of your marriage, you’ll have to furnish the main points of all of the individuals from whom you’ve gotten obtained the presents. Furthermore, the tax official could name the particular person to look earlier than him and should attempt to discover about genuineness of the reward. The tax legislation supplies that in case you aren’t capable of give a passable rationalization in respect of any asset discovered credited in your books of accounts, the tax division will levy a flat tax @ 60%+surcharge as an alternative of the identical being taxed on the slab fee relevant to you. You’ll have to pay curiosity and penalty as bonus in such a scenario.

In case you’re planning to make use of the event of marriage in your loved ones for cash laundering, please watch out. In case the presents obtained and recorded within the books come to the discover of the tax official throughout evaluation continuing the tax officers can ask you to furnish the main points of marriage bills incurred with the main points of the one who had footed the invoice. Furthermore, with a purpose to gauge the dimensions of bridal ceremony, the officer can ask for the video recording and {photograph} of varied features of the wedding. So look earlier than you leap.

I’m positive the above dialogue has been helpful to you.

Balwant Jain is a tax and funding knowledgeable and may be reached on jainbalwant@gmail.com and @jainbalwant his twitter deal with.

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