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Gifts up to Rs 50,000 per year are exempt from tax in India. In addition, donations from particular relatives, such as parents, spouses, and siblings, are also exempt from tax. Gifts are taxable in other cases. The gift tax in India falls under the Income Tax Act as there is no specific gift tax after the Gift Tax Act of 1958 was enacted in 1998.
In India, gifts are given on a number of occasions, such as celebrations such as Diwali, Holi, or the occasion of marriage, to express love for our loved ones.
Nevertheless, gifts are now also used for tax planning reasons as, in multiple given to a specific, any amount of gifts received is exempt from tax. Some people whose gifts they got in their ITR claim that they’re still gifts obtained out of love and affection.
Even so, it’s not the right way, since donations are tax-exempt only in such specific circumstances or where they are obtained by particular persons. Non-disclosure of gifts could result in penalties of between 50 and 200 percent of the tax payable on the income attempted to be avoided.
There are occasions when employers give the employee a present on a special occasion or to boost their productivity, or because they do well. An employee shall be liable for gifts received from the employer only if the value of such gift is equal to or greater than Rs. 5,000. Gifts below Rs. 5,000 in value within the financial year shall be excluded from the vat. These gifts shall be taxable as perquisites under the Head of Salary Income.
Section 56(2)x) of the Income Tax Act, 1961 deals with the taxability of gifts received by a person, except the employer, throughout the year. This provision shall apply regardless of the status of the resident or of the class of assessee.
The donor or donor can be an individual, a partnership business, LLP, a corporation, AOP, BOI, a cooperative society, or an artificial legal body, whether resident or non-resident.
Previous gifts from a resident to a non-resident are, even then, claimed to be non-taxable in India as the recipient used to claim that income does not accrue or arise in India.
In order to make sure that the receipt of gifts is also taxed in the hands of non-residents, Section 9 has been amended by the Finance Act (No. 2), 2019, to provide that income is considered to have accrued or to have arisen in India as a result of the payment of gifts (exceeding Rs. 50,000) without adequate consideration by a resident to a non-resident.
It does not provide proof of the taxability of the gift of the estate as referred to in Section 56(2)(x), inter-alias, immovable property, gold, securities, etc.
Therefore, after the amendment, it may be inferred that gifts in the nature of money in the hands of non-residents provided by resident persons would be paid in their hands, even though gifts of any other manner are also beyond the control of the Income Tax Act.
Where even a person receives any amount of money without consideration and the total value of that sum exceeds Rs. 50,000, the total aggregate value of that sum shall be taxed on the basis of capital income from other sources. For the determination of the threshold, the aggregate amount of receipt from different sources and persons throughout the year shall be considered.
Immovable property received by the assessee for the year, either without consideration or for lack of consideration, shall be deemed to have been income in his hands and to have been taxable in that year if the receipt is within a period of time.
For all cases, the cap of Rs. 50,000 shall be reviewed for each transaction and not for all transactions as a whole.
Movable property as described in the Act shall include any property in the form of shares and stocks, jewels, historical artifacts, sketches, portraits, sculptures, any work of art, or bullion.
In which the transaction includes any other movable property, such as car furniture, the excess consideration for the fair market value shall not be taxed. In this case, the deemed income shall be calculated as follows given way :
If any property is obtained without regard and the total fair market value of it reaches Rs. 50,000, the entire fair market value of such property shall be paid.
The alternative tax can be saved is by offering gifts to your parents or legitimate guardians or to a kid who is a major. Nonetheless, when you contribute the sum, your taxable income stays the same. However, the interest they earn from other products by continuing to invest these funds becomes their own income. So, presuming that their income is lower, you can rest in peace knowing that the money is not going to be taxed.
Previously, so when long-term capital gains (LTCG) tax was effective, gift money can also be invested in a mutual fund or stock for 1 year and used as tax-free income. However, it is not feasible now as the LTCG tax has been reintroduced with effect from 1 April 2018.
Actually, all sorts of donations, including dollars, jewelry, real estate, paintings, or some other valuables, are taxable. However, if the amount of cash or the value of the gift in kind is less than Rs 50,000, the same amount would not be taxable.
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