India is a country of close-knitted families and having a lot of reasons to celebrate Diwali owing to its diversified culture, customs and religion. Various occasions like Diwali where gifts are exchanged or gifting each other is a representation of love and affection and can also are a symbol of social status. However, several times gifts can also be a part of tax planning/tax evasion. While tax planning done within the structure of the law is permissible, tax evasion is prohibited and can be penalised. In this article, we will know about Tax on Diwali Gifts.
Tax on Diwali Gifts
The Government founded gift tax in April 1958 regulated by Gift Tax Act, 1958 (The GTA) with an intention to impose taxes on giving and receiving gifts under certain specific circumstances. Gifts in the form of cash, demand draft, bank cheques or anything having a state were covered. Though, the GTA was abolished in October 1998 and made all gifts tax free. But, Gift Tax was reintroduced in a distinct form and included in the Income-tax provisions in 2004. Also, there
Kind of gift covered
There are various kinds of gifts covered, some of them are –
- Any sum of money without consideration or the monetary threshold is greater than 50,000
- Any immovable property such as land, building etc without consideration and the stamp duty limit is greater than 50,000
- Any property (jewellery, shares, drawings etc.) other than an immovable property without consideration.
- Any immovable property for inadequate consideration.
Tax Exemption on Diwali Gifts
As mentioned above, certain specified gifts received by any person from any person/persons attract gift tax. However, here are some exceptions to this.
- Gifts received on the occasion of marriage
- Gifts received under will or inheritance
- Gifts received contemplation or death
- Gifts received from the local authority
- Gifts received from any fund or institution
Specified Relatives who can receive Tax-free gifts
Should you disclose gifts in your ITR?
The users are required to obtain ITR filing if the income is above the basic exemption limit of Rs 2.5 lakh for individuals below the age of 60. Also if the income remains below the basic exemption limit even after receiving some gifts, it is mandatory to obtain ITR filing. However, if you have obtained a gift of more than Rs 50,000, you should show it in your income tax return.
Are gifts in cash and kind, both taxable?
Yes, all varieties of gifts including cash, gold, real estate, paintings or any other important item are taxable. However, if the cash amount or price of the gift in kind is less than Rs 50,000 the same would not be taxable.
If you need any other guidance concerning ITR Filing, please feel free to contact our business advisors at 8881-069-069.
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