Tax On Gifts: Why tax is not levied on gifts worth lakhs received at a wedding, know- which gifts are taxed?

Tax on gifts: We all keep giving gifts to our family, friends and loved ones from time to time. Gifts are a beautiful way to express emotions. But do you know that some gifts may also have to be taxed? Often people are unaware that according to the Income Tax Department, gifts are also sometimes considered as ‘income’. Therefore, it is important to know which gifts are tax-free and which may attract tax.

In this article we will understand in a simple and detailed way how gifts are taxed in India.

Gifts received from relatives tax-free

The government has made clear rules: If you receive any gift (be it money or property) from any of your relatives, there is no tax on it. But who is “relative”? A list of relatives has been given as per income tax rules. Who are considered relatives?

your husband or wife
your brothers and sisters
Siblings of your wife/husband
your mother’s or father’s siblings
Your and your spouse’s direct ancestors (e.g. grandparents)
Direct descendants of you and your spouse (e.g. children, grandchildren)
Spouses of all of the above

Necessary: Friends are not considered relatives, so expensive gifts received from friends may attract tax.

Tax on more than ₹50,000 from non-relatives

If you receive gifts worth more than ₹ 50,000 in a year from any non-relative (like friend, office colleague, neighbor, etc.), that amount will be added to your income and taxed as per your tax slab.

Example: If your friend gives you ₹70,000 in cash on your birthday, then ₹70,000 will be included in your income and taxable.

Gifts received at the time of marriage are completely tax-free

Marriage is a special occasion of life, hence the tax law also considers this occasion as special. All types of gifts received on the occasion of marriage are completely tax-free – be it cash, cheque, bullion, car or real estate and it does not matter whether the gift is given by a relative or a friend, colleague or acquaintance.

Just keep one thing in mind: This exemption will be applicable only on gifts received on your marriage, gifts received on birthday, anniversary, house warming or other occasions are not tax-free.

Tax rules on immovable property (land/house)

If you receive land, flat, plot or house as a gift, then things to keep in mind: No tax if received from a relative. No matter how valuable the property is, there is no tax.

Transfer from non-relative will attract tax if three conditions are met: The property is received by you without any payment, it is a capital asset and its stamp duty value is more than ₹50,000. Example- If a friend gifts you land worth ₹ 10 lakh, then the entire amount of ₹ 10 lakh will be considered as your income and will be taxed.

Tax rules on movable property

Movable property means things that can be moved from one place to another, such as:

gold Silver
jewelery
Shares/Securities
painting
sculptures or works of art
expensive collectibles
Virtual Digital Assets (Crypto etc.)

No tax on movable property received from relative

But such gifts received from non-relatives will be taxable if the total value exceeds ₹ 50,000. For example, if a friend gives you a gold pendant worth ₹ 60,000, then ₹ 60,000 will be considered as your income.

Tax rules on gifts to HUF

Special rules have also been made for HUF (Hindu Undivided Family).

Tax is not applicable in the following situations:

Money received at the wedding of a family member
bequeathed or inherited money
Money received before or near the death of the donor
Money received from local bodies or certain institutions
Money received from educational/medical/religious trust (with certain conditions)
Money found in companies’ amalgamation, demerger etc.
If a person gives money to a trust which is created solely for the benefit of that person’s relatives

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