Receiving presents may be thrilling, nevertheless it has its tax implications. Right here’s a take a look at when receiving presents may be completely tax-fee.
Receiving presents may be thrilling. Nevertheless, it could include its tax implications. In truth, presents (i.e. financial or non-monetary) obtained by any individual [including an individual or Hindu Undivided Family (HUF)] are thought of as taxable for the recipient as revenue from different sources at relevant tax slab charges. These are taxable if the worth of such present exceeds Rs 50,000. For non-monetary presents similar to immoveable property, shares and so on. even a sale transaction may end up in a deemed present revenue. “This is able to come up when on switch of such properties (whether or not moveable or immoveable), there’s a shortfall in consideration truly paid for the sale as in comparison with the stamp obligation worth (for immoveable property) / truthful market worth (for moveable property). Such a shortfall can be considered revenue for the client if the shortfall exceeds Rs 50,000,” says Parizad Sirwalla, Companion and Head, International Mobility Providers, Tax, KPMG in India.
The exception to such taxable presents is relevant below the next eventualities:
Presents from specified family members
Any present obtained from specified family members just isn’t topic to tax within the fingers of the recipient. Such specified ‘family members’ can be your partner, brother/sister of self/partner/dad and mom, lineal ascendants or descendants of self/partner in addition to the spouses of all these individuals. For an HUF, a specified ‘relative’ can be a member of the HUF.
Nevertheless, “please notice that at instances, clubbing provisions might apply. For instance, if one partner presents Rs 10,00,000 to the opposite partner, there isn’t any tax to be paid by the recipient partner on receipt of present of Rs 10,00,000. Nevertheless, when there may be any subsequent revenue generated from the present/funding of such present, the stated revenue can be clubbed and provided to tax within the fingers of the donor partner. Clubbing provisions would additionally apply if a Karta of a HUF presents to the HUF or father or mother(s) presents to minor kids, and so on,” says Sirwalla.
Presents obtained on the event of particular person’s marriage
Any quantity obtained as a marriage present just isn’t taxable within the fingers of the recipient, both from the relative or non-relatives.
A number of the different exclusions embody presents obtained:
# Below a Will
# By means of inheritance
# In contemplation of dying of the payer/donor
# From any outlined native authority
# From any fund, basis, college, different instructional establishment, hospital or different medical establishment
# As distribution of property on partial or whole partition of HUF
# On sure specified company actions
# From a belief arrange solely for the good thing about the relative of the person.
Moreover, in case you obtain presents (whether or not financial or non-monetary) out of your employer, in combination exceeding Rs 5,000 each year, that is taxable as perquisite below the top ‘Earnings from wage’ for the worker.
Additional, “there are normal penal provisions for transactions in money (i.e. transactions carried out aside from by cheque/ draft/ different banking channels, and so on.) if such transactions are in extra of Rs 2,00,000. These penal provisions would additionally cowl money presents. Additionally, presents obtained by workers valuing greater than Rs 50,000 from the employer could also be topic to Items and Providers Tax (GST) for the employer,” says Sirwalla.
Some illustrative examples of present taxation are as follows:
# Mr. X obtained a cheque of Rs 84,000 from a good friend on his birthday.
The complete quantity of Rs 84,000 might be taxable as a present as it’s neither obtained from a specified relative or every so often of marriage.
# Mr. A bought a flat for a consideration of Rs 45,00,000 from an unrelated individual. The stamp obligation worth of such flat is Rs 46,00,000.
Because the distinction within the stamp obligation worth and agreed consideration is greater than Rs 50,000, this distinction (Rs 1,00,000) can be taxable within the fingers of Mr. A.
You, nevertheless, must keep in mind that presents have been extensively utilized in India as a tax planning measure to cut back taxes. Tax authorities, due to this fact, usually probe presents to determine their authenticity and the legitimacy of the sources of funds out of which presents have been given. Therefore, it might be prudent to take care of associated paperwork to point out that the present has been genuinely obtained and the individual giving the present has ample sources of funds to justify the present.
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