Income Tax Rules on Gifts Received

When someone receives a gift from a relative or a friend, its tax implications is the last thing on their mind. However, this doesn’t change the fact that there are certain income tax rules that apply to gifts as well.

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The following are some of the important income tax rules that apply to gifts received by someone:

1. The Rs. 50,000 Limit

Gifts amounting to less than Rs. 50,000 in a year are not taxable. However, if the total value of the gifts exceeds Rs. 50,000 for a year that it will be taxed. It’s important to note here that the tax is applied not on the excess money (i.e. the amount left after deducting Rs. 50,000) but on the total amount instead.

For instance, if your friend gifts you Rs. 30,000, then you don’t have to pay any tax on it. However, if during the same year another friend gifts you Rs. 30,000, then you have to pay income tax on the full amount i.e. Rs. 60,000.

2. Gifts Received from Family and Relatives

The previous rule about Rs. 50,000 limit doesn’t apply for your family and relatives. So, your father, mother, uncle, and even in-laws, etc. can gift you as much amount or items they want, and you won’t have to pay a single rupee as a tax on them.

3. Wedding Gifts

Gifts received by a person during their wedding are not taxable. This rule applies to relatives as well as non-relatives. Moreover, there is no limit in this situation, i.e. no matter that’s the total amount of the gifts received, there is tax obligation.

4. Gift Tax on Movable and Immovable Properties

Gift tax applicability on moveable properties:

• Without Consideration: If the fair market value of the property received without consideration is less than Rs. 50,000, then it’s not taxable. However, if it’s more, it’s taxable.
• With Consideration: If the fair market value of the property received for a consideration exceeds Rs. 50,000 then the tax is charged on the difference between the property’s fair market value and the consideration given.

Gift tax applicability on immovable properties:

• Without Consideration: If the stamp duty value of the property received without consideration is less than Rs. 50,000, then it’s not taxable. However, if it’s more, the total stamp duty value is taxable.
• With Consideration: If the stamp duty value of the property received for a consideration exceeds Rs. 50,000 then the tax is charged on the difference between the property’s stamp duty value and the consideration given.

Note:

Consideration: it’s when you have to pay some value for receiving the gift.

Movable property: jewelry, securities, shares, paintings, etc.