Acquired high-value presents from mates & household? Know the way they’re taxed  |  Photo Credit score: Thinkstock
The most important competition of the 12 months in India, Diwali, simply concluded and persons are busy counting their blessings together with the presents acquired from family and friends.
Extra usually than not, even property and shares are transferred by the use of presents with a view to save taxes. Reward constitutes a switch of movable or immovable property or cash from one occasion to a different. Often gifting is used to switch property or cash throughout the household itself for instance inheritance.
The Earnings-Tax division permits sure classes of presents to be tax-free. Nevertheless, it should not be forgotten that typically presents are used to evade tax and subsequently just some presents are tax-free whereas most others are usually not.
The taxation on the exercise is regulated by way of the Reward Tax Act (GTA), 1958. This lined any high-value presents corresponding to money, demand drafts, financial institution cheques and many others. GTA was later repealed and integrated within the Earnings Tax Act (ITA), 1961, to verify tax evasion by way of gifting.
Any quantity larger than Rs 50,000 acquired with out consideration is handled as “revenue from different supply” and is taxed within the arms of the recipient in India, as per ITA.
Which primarily means there’ll no tax outgo as the worth of the reward doesn’t cross Rs 50,000 however your complete quantity turns into taxable if the worth exceeds the brink. The restrict is relevant to the mixture worth of all presents acquired inside a monetary 12 months.
Nevertheless, there are different classes not lined by the ITA as outlined in it. It will be important for the recipient to grasp which presents shall be topic to tax and which wouldn’t. It’s to be famous that the general mixture worth of presents acquired throughout the 12 months is taken under consideration for the aim of tax and never a person reward or transaction.
Items from relations
Part 56 of the ITA exempts presents acquired from relations from tax. As per ITA ‘relations’ represent: partner, brother or sister, sibling of the partner, brother or sister of both of the mother and father, any lineal ascendant or descendent, any lineal ascendant or descendent of the partner, partner of the individuals referred above.
Notably, mates don’t come below this class of ‘relations’ and subsequently any high-value presents acquired from them are taxable. Nevertheless, the ITA offers that any reward or cash acquired throughout the marriage ceremony can’t be accounted for as “revenue” and is subsequently tax-free. Nevertheless, it’s prudent to take care of a report of cash acquired as money presents to justify to the I-T division later.
Items acquired by the use of will or inheritance or in contemplation of loss of life are additionally tax-free.