Reward value above `50,000 obtained in a yr attracts tax

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It’s not simply incomes earned as wage, or by enterprise, career, property, or by the use of capital features which might be taxable. Even some presents are taxed, offered the worth is above 50,000 through the yr. Reward tax was first launched in 1958, then abolished in 1998, however reintroduced in 2004 (efficient from evaluation yr 2005-06).

The Act

At current, reward tax is roofed beneath part 56(2) of the Earnings Tax Act, 1961. The Act offers that any reward obtained in extra of fifty,000 in type of money, demand draft, cheque or specified belongings by a person or Hindu undivided household (HUF) is taxable beneath the earnings tax head ‘earnings from different sources’. If the worth exceeds 50,000, the entire quantity is taxed. As an example, in case your good friend gave you a present value 40,000, you needn’t trouble about tax. However when you get one other reward, from the identical particular person or another person, with a worth greater than 11,000, the entire quantity, i.e., 51,000, will probably be taxable.

Do not forget that the tax applies not solely to presents obtained in money, but in addition to these obtained in sort, equivalent to immovable property (together with land or constructing) and specified movable property, equivalent to jewelry, work, shares, debentures, bullion, archaeological collections, and so forth. The reward is taxable solely within the fingers of the recipient.

The exemptions

Any sum or property obtained, at any level of time, from sure family, are exempt from earnings tax. In accordance with the Act, these are your partner (husband or spouse), brothers, sisters, brothers in-law, sisters in-law, dad and mom, dad and mom in-law, any lineal ascendants or descendants of the person or partner, and brothers or sisters of oldsters of particular person or partner.

Other than presents obtained from family for no matter cause, presents obtained on marriage are additionally exempt from tax. Along with this, any quantity obtained beneath a Will or inheritance can also be exempt. Any sum of cash or property obtained in contemplation of demise can also be exempt. Then, any reward obtained from an area authority, fund, basis, college or different training establishment, hospital, belief or charitable establishment can also be exempt.

What must you do?

Presents obtained within the type of money or cheque don’t essentially should be executed by a present deed. A easy be aware on a sheet of paper mentioning the small print would work. Nonetheless, gifting of movable property is required to be executed on stamp paper (might be of a nominal worth), which then needs to be notarized.

If the reward is an immovable property, it needs to be backed by a registered reward deed. Not doing so means the ‘switch’ is not going to have authorized sanctity and the property title can’t be handed to the receiver. So, in case you are being gifted, say, a home or a plot, it’s higher to get a present deed executed and registered in your favour. Doing so makes you the authorized proprietor of the property, offers you the appropriate of possession and the appropriate to switch the possession.

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