Under the Income Tax Act, certain gifts can be taxed. But it will depend on who has given the gift to you and what is its cost. If you have received a gift and it does not fall in the exempted category, then you will have to disclose it in the Income Tax Returns (ITR).
Tax Slab in India: Diwali is a festival of lights and happiness. People give gifts to their relatives and friends on this day. Apart from this, employed people get gifts from their companies. Transaction of gifts is very common on Diwali. But not many people know that gifts received in a financial year may attract tax under the current Income Tax Act.
Certain gifts may be taxed under the Income Tax Act. But it will depend on who has given the gift to you and what is its cost. If you have received a gift and it does not fall in the exempted category, then you will have to disclose it in the Income Tax Returns (ITR).
What is the taxation formula
If the value of gifts received by you in a financial year exceeds Rs 50,000, then tax is levied under section 52(2) of the Income Tax Act. These gifts can be in the form of cash or anything. However, gifts received from close relatives and family members are exempt from tax. This means that no tax will have to be paid if gifts are given to you by siblings, parents or spouse.
It is to be noted here that friends have not been kept in the category of relatives. Therefore, the gifts received from them will have to be included in the Income From Other Sources and tax will have to be paid according to the income slab.
Gifts divided into categories
However, gifts are divided into different categories on the basis of their type. For example, cheque, draft or cash is considered a monetary gift and if their value exceeds 50 thousand in a financial year, then income tax will be levied on it. If the gift is received in the form of building or land, then it will be counted as immovable property. Tax will also be levied on this, if the value of stamp duty is more than 50 thousand.
Whereas collection, jewellery, shares or securities, drawings, paintings are considered as movable property. If the value of the gifts is more than 50 thousand, then tax will have to be paid on them in the same situation. On the other hand, if a vehicle is received as a gift, then it does not come under the purview of property and tax will not be levied on it.
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