Last Updated:
Section 56( 2 )( x) of the Income Tax Act lays out the rules pertaining to the tax of presents.
Know regarding the tax obligation on presents obtained all through the Diwali interval. (Representative picture)
Diwali, the celebration of lights, is a time of delight, occasion, and change of presents. Whether it’s cash, vogue jewellery, or varied different helpful merchandise, providing and getting presents is a crucial element of Indian society, particularly all throughDiwali However, from a tax viewpoint, numerous individuals proceed to be unpredictable regarding the tax obligation ramifications associated to presents. Do presents obtained all through Diwali herald tax obligations, and in that case, what are the suitable rules?
Understanding the Basics of Gift Tax in India
In India, presents had been exhausted below the Gift Tax Act, 1958, but the federal authorities eradicated the Act in 1998. However, particular stipulations related to the tax of presents had been reestablished in 2004 below the Income Tax Act, 1961. According to those stipulations, presents obtained by a particular or Hindu Undivided Family (HUF) going past a specific value are thought of as earnings and undergo tax.
Section 56( 2 )( x) of the Income Tax Act lays out the rules pertaining to the tax of presents. The stipulations relate to all form of presents, consisting of these obtained all through occasions likeDiwali Gifts can take differing kinds, akin to cash, movable or stationary constructing, and likewise financial instruments. However, there are particular exceptions and issues that each taxpayer should perceive to forestall any kind of potential tax obligation accountability.
What Kinds of Gifts are Taxable?
Under Section 56( 2 )( x), the listing beneath sorts of presents are taxed if their amassed value goes past Rs 50,000 in a fiscal 12 months:
1. Monetary Gifts: Cash, cheques, or monetary establishment transfers.
2. Movable Property: Jewelry, shares, and security and securities, bullion, artwork work, and so forth
3. Immovable Property: Land, buildings, or any kind of property.
If the entire value of presents in these teams goes past Rs 50,000 in a fiscal 12 months, the entire amount is thought of taxed as “Income from Other Sources” and contributed to the recipient’s gross revenue.
Exemptions to Gift Tax
While the regulation mandates that presents going past Rs 50,000 are taxed, quite a lot of exceptions can help receivers forestall tax. The essential exceptions are as complies with:
1.Gifts from Relatives: Any current obtained from a “relative” is excluded from tax obligation, regardless of the value. As per the Income Tax Act, relations include:
- Spouse of the particular
- Siblings (bro or sis)
- Parents and grandparents
- Children (daughter or son)
- Siblings and mothers and dads of the companion
- In- legislations (boy’s different half or little woman’s hubby)
For occasion, should you get hold of gold vogue jewellery nicely value Rs 1 lakh out of your mothers and dads all through Diwali, it isn’t taxed because it drops below the exception of presents from relations.
2. Gifts Received on Special Occasions: Gifts obtained all through marriage ceremony occasions are moreover excluded from tax, regardless of that the benefactor is. However, this exception is restricted to marriage ceremony occasions and doesn’t relate to varied different distinctive celebrations like birthday celebrations, marriage ceremony anniversaries, or occasions like Diwali.
3. Gifts from Friends or Non-Relatives: Gifts obtained from good mates or non-relatives undergo tax obligation if their full value goes past Rs 50,000 in a fiscal 12 months. If the value of such presents stays listed beneath the Rs 50,000 restrict, they aren’t taxed.
4. Inheritances: Any constructing or money obtained by way of inheritance or a will isn’t handled as gross revenue. This consists of genealogical buildings gave by way of generations.
5. Gifts to Charitable Institutions: If you contribute presents to a philanthropic group or belief fund, they aren’t exhausted, and also you is perhaps certified for tax obligation reductions below Section 80G, relying upon the form of philanthropic firm.
Taxation of Employer Gifts During Diwali
It is pretty typical for firms to offer presents to their employees members all through Diwali, akin to coupons, gizmos, or incentive repayments. The taxability of those presents depends on their value and kind:
1. Cash Gifts: If the corporate offers cash, it’s utterly taxed as element of the employees member’s wage.
2. Non-Cash Gifts: Non- cash presents (akin to coupons, gizmos, or units) valued roughly Rs 5,000 are excluded from tax obligation. If the value of non-cash presents goes past Rs 5,000, the surplus amount is contributed to the employees member’s taxed wage and exhausted based on the suitable earnings tax obligation piece.
3. Bonus Payments: Any Diwali incentive paid by the corporate is thought of element of the employees member’s wage and is totally taxed.
Recording and Reporting Gifts
It is vital to maintain paperwork of the presents obtained, particularly if they’re appreciable in value. In state of affairs the amassed value of presents goes past Rs 50,000, it’s the taxpayer’s obligation to report these below “Income from Other Sources” when submitting their tax return (ITR).
Additionally, for high-value presents like constructing or deluxe merchandise, it’s endorsed to report the purchases accurately, consisting of the benefactor’s data, to forestall any kind of examination from the tax obligation authorities.
Conclusion
While Diwali is a interval of delight and kindness, it’s essential to stay educated regarding the tax obligation ramifications bordering presents. In India, presents are taxed in the event that they surpass Rs 50,000 in a fiscal 12 months until they originate from spared assets like relations or marriage ceremony occasions. As a liable taxpayer, you will need to perceive the exceptions and limits that use, ensuring that you don’t unintentionally wind up with an unexpected tax obligation accountability. This Diwali, commemorate with love and pleasure, but moreover with a transparent understanding of your tax obligation duties.
By being educated, you may respect your joyful interval stress-free whereas remaining licensed with the tax obligation legislations.
-The author is a authorized accounting skilled and MD of Neeraj Bhagat & &Co Views revealed are particular person.
News firm” tax obligation Do You Need to Pay Tax on Diwali Gifts? Know the Rules
