From Thursday, if you receive any property, jewellery or any work of art worth more than Rs 50,000 as a gift, brace up to pay an additional tax.
According to amendments in the Income Tax Act 1961, six kinds of gifts (see box) will be brought under the income tax net if the value of gift were above Rs 50,000. The onus on paying the tax will rest with recipient of the gift, a finance ministry statement said.
Property or valuables received from a relative, through inheritance or will, as a wedding gift or as endowment from a trust or institution have, however, been spared from the tax net.
Earlier cash gifts exceeding Rs.25, 000 were subject to tax with effect from April 2004. Later the Act was amended in 2006 raising the threshold limit for income tax on cash gifts to Rs 50,000.
In addition, persons should also disclose the value of such gifts while filing income tax returns from the next financial year ( 2010-11).
Cash gifts also enjoy exemptions similar to for gifts-in-kind.
Experts said that move is aimed to curb the practice of making payments through property and other valuables. Such transactions are carried out to minimise the amount of cash transfer that would attract tax payments.
This (the imposition of income tax on gifts and property) has been done to ensure that transactions on valuable items are brought under the tax net, said Delhi-based financial planner.