TomorrowMakers

Diwali gifts are liable for taxes, and you must know about this before you receive any gifts this Diwali.

Is Your Gift Taxable

While monetary gifts are taxable, some exception is given in a financial year according to Income Tax guidelines. Monetary gifts that relative gifts to his parents, sister, brother, spouse, etc., will not be taxed. Under HUFs, money received on the occasion of marriage, inherited money, money received for the death of a donor or payer, money received from a local authority, money received from a fund, university, or foundation, etc., will not be taxed. 

Also Read: Everything you need to know about a gift deed.

Is Your Gift Taxable?

CEO and Founder of Clear, Archit Gupta, says if the vouchers or gifts received from an employer are less than Rs. 5,000, they will not be taxed. Any gifts over Rs. 5,000 you receive will be taxed and added to your income bracket. For example, if the employer gifts you presents worth Rs. 5,000 on Diwali and Rs. 3,000 during Christmas, you will be taxed on Rs. 3,000 as it is over the Rs. 5,000 limits. If your employer gives you a monetary bonus, it will be added to your salary and taxed. Gifts from family members are not subject to taxes. 

The Threshold

You will be taxed if you receive gifts over Rs. 50,000 during a year under Section 56(2) of the IT (income tax) Act. Gifts up to Rs. 50,000 will be tax-free. However, any amount exceeding this threshold will be liable to be taxed.

Immovable Property

If the stamp duty of a building or land exceeds Rs. 50,000, it will be taxed. Tax is levied on the value of the stamp duty. Any gift received from siblings, grandparents, or spouses will not be taxed; the amount does not matter. However, if you invest the amount received, you must pay tax. If you receive gifts from distant relatives, you will be free from tax up to Rs. 50,000. If the amount exceeds Rs. 50,000, you will have to pay tax on the entire amount. 

Also Read: Inherited property tax. All you need to know! 

Conclusion

We hope now you understand what will be taxed and what won't be. Enjoy the festive season with friends and family, and remember the taxes you might have to pay.