Though the Reward Tax Act was abolished in 1998, all items you obtain throughout Diwali or some other competition will not be tax exempt. Not solely do you must declare all items whereas submitting your revenue tax return (ITR), you might also should shell out revenue tax on items based on your tax slab. You will need to perceive which items are taxed and which aren’t. Moreover, there are separate revenue tax guidelines governing Diwali items or bonus acquired out of your employer, says tax professional Homi Mistry, associate, Deloitte India.
Diwali present or Diwali bonus from employer:
In case you obtain any present voucher or token value greater than ₹ 5,000 out of your employer on any ceremonial event like Diwali or New Yr, then it’s handled as a part of your wage and taxed based on your tax slab.
The tax exemption is proscribed to present vouchers or tokens totalling lower than ₹ 5,000 in any given monetary 12 months. Due to this fact, for those who obtain two vouchers totalling greater than ₹ 5,000 throughout a monetary 12 months then you’ll be taxed.
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There isn’t a tax exemption on money given as a present by an employer. Mistry factors out that even for those who get ₹ 2,000 money out of your employer, it’s taxable as revenue from wage.
Diwali present from pals:
The tax-free restrict on this case is ₹ 50,000 per 12 months. If the whole worth of items acquired throughout a monetary 12 months is greater than ₹ 50,000, then it’s counted as revenue from different sources and taxed based on your tax slab.
Tax professional Mousami Nagarsenkar says the ₹ 50,000 exemption is combination. For instance, for those who obtain three items value 20,000 every, then you’re breaching that ₹ 50,000 exemption restrict and might be taxed on the entire ₹ 60,000, somewhat than the distinction of ₹ 10,000.
Presents from kin:
Presents acquired from kin are absolutely exempt however any revenue derived from that present is taxable within the fingers of the donor. For this function, kin have been outlined as partner, siblings of self/partner, mother and father/grandparents of self/partner, and so forth.
For instance, for those who make a present of ₹ 1 lakh to your spouse on Diwali or at some other time throughout the 12 months, then there isn’t a tax legal responsibility for her. However any revenue she derives from that present, like curiosity or revenue on funding, might be taxable in your revenue tax returns.
Nonetheless, in case you are receiving a present from anybody on the event of your marriage or as a part of a will, then it’s tax exempt.
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