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How Are Gifts Taxed? - Gift Tax Rules In India Research Team | Posted On Tuesday, May 15,2018, 05:01 PM

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How Are Gifts Taxed? - Gift Tax Rules In India



Gifts are a way of expressing love, gratitude and appreciation. Gifts show that you care. They bring memories of good times. Gifts light up the occasion. Gifts without any reason and purely out of love are selfless.

Be it your dear grandparents who shower endless love generously on you by gifting you land, money or other assets, or be it your parents who gift you that new race bike or jewellery, gifts send a clear message.  

Having mentioned gifts and the amount of love they represent, the law somehow thinks that too much love is not healthy, if it comes free of cost. Hey! Everything comes with a price. So do gifts. You may find it strange and illogical, but gifts are taxable in the hands of the receiver. So, be careful, you might end up paying heavily for the gifts you receive!

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Income Tax Act, 1961, requires you to pay tax for gifts received if the value exceeds Rs 50,000 a year. These gifts may be anything like jewellery, shares, movable and immovable property, cash and so on.

How Are Gifts Tax in India?

The good news is not all gifts are taxed in your hands:

1. Tax free gifts:

Gifts presented by some relatives are free of tax. This is a list of defined relatives:

  • Your parents
  • Your spouse
  • Your siblings
  • Your spouse’s siblings
  • Your parent’s brothers and sisters
  • Your lineal descendants and their spouses
  • Your spouse’s lineal descendants and their spouses

2. Gifts received on the occasion of your marriage from anyone and everyone is tax-free. Make sure that the date of the gift deed is your marriage day or at least close to it.

3. You receive gifts by inheritance or through a WILL.

Note:  Any income that is generated through the gift will be taxed. For example, say you receive a house as a gift or through a WILL. Then, you decide to rent it out. The rent you get is taxable in your hands.

4. Any gift (or amount) you receive from local authorities or educational institutions for your great deeds like a courageous act or on merit basis are tax-free.

SEE ALSO: 10 Tips to Manage Finances Early in Career

Which gifts are taxed?

Gifts will be taxed if:

  1. You receive gifts other than on occasions mentioned above.
  2. You receive gifts from a person who isn’t a relative.

If such gifts exceed Rs 50,000 in value, the entire amount will be added to your income and taxed in your hands.

How are gifts taxed?

The gifts you receive are treated as an income and the value of these gifts are added to your taxable income. You will be taxed under the tax slab rates applicable in that financial year.

You have to report the value of the gifts that you receive as taxable income under the head ‘Income from other sources’. The value of the gift will be the cash or cheque amount, or stamp duty value of a property, if it’s a house.

Make a gift deed

It’s important to back up your gift by a gift deed. A gift deed is a legal document used, which records the transfer of a gift from the giver to the receiver, with no exchange of money. A fee called stamp duty is charged for the registration of a Gift Deed. The charges are based on gender and differ from state to state.

Be sure to analyze the effects of gifting, before you actually decide to give a gift. Your gifts must not turn out to be a burden on the receiver.

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