NIO Desk, July 29
Gift-exchanging is a widespread custom in all cultures and traditions. Giving gifts is a central aspect of Indian culture, and festivals wouldn’t be complete without them. A lot of taxpayers might not be aware that gifts received during a fiscal year may be subject to tax. Gifts received by an individual are taxable under the current Income Tax (I-T) law.
According to the law, if you receive a gift and it doesn’t fall under an exemption category, tax can be levied. When filing an Income Tax Return (ITR) for that specific financial year, a person must disclose any gifts they have received.
All items, both in cash and kind, are included in the gifts. According to Section 56(2) of the Income Tax Act, gifts received by a taxpayer that total more than Rs. 50,000 are considered taxable. There is no tax liability as long as the value of gifts received during a fiscal year stays below the exempted amount limit of Rs. 50,000.
Gift taxes, however, vary depending on who you receive gift from. An individual is not required to pay taxes on gifts received from family or close relatives. In this case, the taxpayer’s parents, spouse, brother, and sister are considered relatives.
The existing law states that friends are not considered relatives for taxation purposes. The gifts you receive from your friends are considered “income from other sources,” and as a result, they are subject to tax.
ITR Filing: Tax on gifts received from friends and family and exemptions
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