Should you pay tax on your gifts?

Описание: Two occasions when gifts from anyone are exempt from tax

MARRIAGE

Gifts received by an individual from anyone on the occasion of his or her marriage are not taxable.

This does not apply to gifts received by the parents or kin of the bride or groom.

Inheritance

Monetary gifts or property received under a will or by way of inheritance is not taxable.

This will also hold in case someone bequeathes such a gift in contemplation of death (who is terminally ill and expects to die shortly from illness).

IF IT’S MONEY

The aggregate value of gifts is taxable if it is more than Rs.50,000.

For instance, A receives a gift from B worth Rs.20,000 and from C worth Rs.40,000.

As the aggregate value has crossed the threshold of Rs.50,000, A will have to pay tax on the total amount of Rs.60,000.

IF IT’S MOVABLE PROPERTY

The fair market value (FMV) of gifts like jewellery, shares, art, bullion, such virtual digital assets etc., above Rs.50,000 will be taxed.

The value of such gifts is specified in the tax laws.

For instance, in the case of jewellery being gifted, it is the price that the ornaments would fetch if sold in the open market.

However, some items are not defined as prescribed movable property under the Income Tax Act and gifting these does not attract any tax, such as a television or a smart phone.

IF IT’S IMMOVABLE PROPERTY

The stamp duty value of gifted property exceeding Rs.50,000 will be taxable.

If A gets a flat worth Rs.50 lakh (according to circle rates), but pays only Rs.30 lakh for it, the excess Rs.20 lakh would be considered a taxable gift.

However, if the difference between actual value and stamp duty value is less than Rs.50,000, the transfer will not be a taxable gift.

The exemption is if property is received from a foundation, institution, hospital, trust, religious or charitable organisation as defined under Sections 10(20), 10(23C) and 12AA of the Income Tax Act.