We all love receiving gifts! It is a way of expressing greetings and conveying our best wishes to our loved ones, especially during the festival season. Whether cash, gold, or silver, exchanging gifts fosters stronger relationships, intimacy, and affection. But many are not aware of one fact related to gifting — receiving gifts attracts taxes too.
Yes, you read it right.
Assets received as gift or inheritance are taxed under Section 56(2) of the Income Tax Act. But not all gifts received are taxable. You only have to pay taxes if the aggregate value of the gifts received during a year exceeds Rs 50,000. There are exemptions too, says Manikanta Racharla, Chief of Growth and Co-founder at Coine.ai, in an interaction with CNBC-TV18.
Let’s understand the different scenarios in detail:
When the gift is received from the employer
In India, almost every employer offers gifts to their employees on various occasions during the year, such as Diwali, New Year, etc. As per the Income Tax Act, if an employer offers any gift voucher in kind or cash amounting to less than Rs 5,000 during the financial year, then it is wholly exempt.
However, if the amount of gift exceeds Rs 5,000, then the whole amount is treated as part of salary and taxed as a 'perquisite', according to one’s tax slab, said Deepak Menon, Manager - Taxation, IndiaFilings.
Gifts received from relatives
According to Kapil Rana, founder & chairman, HostBooks Ltd, gifts received from relatives are fully exempt from tax without any limit, provided such relative comes under the definition of the relative for the purpose of Section 56(2).
Gifts received from friends and others
Gifts received from friends will be treated as income from other sources and taxed accordingly. However, gifts worth up to Rs 50,000 (either at Diwali or any other festival) received in aggregate during a financial year, are exempt from tax.
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(Edited by : Thomas Abraham)