No tax on money items as much as Rs 50K: All it’s good to learn about reward taxation guidelines in India


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Mumbai: At current, beneath the Indian income-tax legal guidelines, there isn’t a reward tax in India.

Presents have been used extensively as a tax planning measure to scale back taxes. Nevertheless, tax authorities usually probe items to determine the legitimacy of the sources of funds out of which items have been given. 

Money items greater than Rs 50,000 are thought of as revenue within the arms of the recipient, besides if the quantity is obtained from family members or on particular events like marriage or beneath a Will.

As an example, when you get items of Rs 4,000 every from 15 buddies in your birthday, the whole quantity exceeds Rs 50,000 and therefore the complete Rs 60,000 can be taxable. The tax on items must be paid by means of advance tax / self-assessment tax earlier than the tax return is filed by the individual receiving the reward.

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Suppose you’re employed in Chennai and remit cash frequently to your sister in Kanpur, who works in a non-public firm. She deposits this cash in an account in her personal title. Does she must pay tax on it? Additionally, does she need to pay tax on any curiosity earned on this cash? 

Switch of cash to your sister as a right will quantity to a present within the arms of your sister. A present of cash, due to this fact, to your sister may also don’t have any tax implication for both of you.

Your sister can be required to pay tax on the curiosity revenue and report it in her income-tax return. She might get a deduction beneath Part 80TTA of the Revenue-tax Act, 1961 for curiosity revenue from financial savings financial institution accounts as much as Rs 10,000.

Nevertheless, revenue tax is payable on any sum of cash, movable property or immovable property obtained by a person with out consideration (that’s, with out a quid professional quo), besides items obtained from a relative.

Underneath the income-tax regulation, the time period ‘relative’ contains: 

a) partner, 

b) brother or sister, 

c) brother or sister of the partner, 

d) brother or sister of both of the mother and father, 

e)  any lineal ascendant or descendant, 

f) any lineal ascendant or descendant of the partner, and 

g) partner of the individual referred to in clauses (b) to (g). 

Underneath part 56 of the income-tax Act, cash exceeding Rs 50,000 obtained by a person throughout a monetary 12 months with out or for insufficient consideration, is taxed beneath ‘Revenue from different sources’ within the arms of the recipient. 

An exemption is allowed beneath part 56 if the sum of cash is obtained from a relative or on the event of marriage. So, the quantity of reward that you’ve got obtained in your marriage ceremony day shall not be taxable as revenue in your or your spouse’s arms. This may be claimed as exempt from tax. 

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It, nevertheless, must be disclosed in your returns to be compliant from a reporting perspective.

Additionally, money or items in sort (presents) from non-relatives aren’t taxable as much as a worth of Rs 50,000 in a monetary 12 months.

To find out the taxable worth of an immovable property obtained as a present, it’s good to verify the stamp obligation worth. If the stamp obligation worth crosses Rs 50,000, then the quantity chargeable to revenue tax = Stamp Obligation Worth – Consideration paid by the recipient, if any.

Any revenue arising to the partner or minor kids or daughters-in-law on the reward given can be clubbed within the arms of the individual giving the reward. For instance, when you reward a sum of Rs 60 lakh to your spouse and he or she makes use of this cash to buy a home and will get hire for the home, although the reward of Rs 60 lakh won’t be topic to tax both in your or your spouse’s arms, the hire that she receives can be thought to be your revenue and be added to your taxable revenue and taxed in accordance with the Revenue Tax Act.

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