Got Generous Gifts This Festive Season? Watch Out For The Tax
There may be taxes that the receiver will have to pay if the value of these gifts exceed a certain limit.
A few generous gifts are bound to find their way to one, especially during the festive season.
Remember, though, that recipients are required to pay tax if the value of these gifts exceeds a certain limit.
When Are Gifts Taxed?
If the total amount of gifts received through the year exceeds Rs 50,000, taxes need to be paid on this income.
"There will be tax on gifts if the valuation figure exceeds Rs 50,000 for income from gifts in cash or other assets," said Arnav Pandya, founder, Moneyeduschool.
This limit is for the whole year, and one will be taxed if the income from gifts received goes beyond this amount.
Price Of Priceless Presents
The excess amount of income is taxed according to the slab rate. To illustrate, consider that one received Rs 55,000 under a year from multiple people.
Then the excess of Rs 5,000 is added to the income of the individual and taxed at the slab rate.
"In case of assets of assets like jewellery or land, the value that exceeds Rs 50,000 will be taxed at the slab rate along with the individual's income," said Pandya.
There Are Some Exceptions
There are certain exceptions to the rule. "Gifts received at the time of marriage and gifts received from close relatives will not be taxed. Relatives include one's spouse, siblings, parents, lineal ascendant or descents, along with spouses' relatives," he said.
No taxes will be levied even if the gifts received on the occasion go beyond the Rs 50,000 limit.
Count Your Blessings And Keep Accounts
Even if the gifts received do not cross the Rs 50,000 limit, it is best to keep a record of the transfer. This is especially important when it comes to gifts that include assets like land or gold.
"Taxes might come into play when selling the assets to determine the price or capital gains. One can keep a record of the gift deal, like transfer documents in the case of real estate," said Amol Joshi, founder of PlanRupee Investment Services.
Keeping track of cash gifts and assets develops a sense of accountability, according to Joshi. Having a clear idea of how much one has been given enables responsible and paced spending as well.
