A few months ago, Mumbai-based Sunil Ullal was thrilled when a friend gifted him a valuable painting. However, he was in for a surprise when his chartered accountant told him that he would have to pay tax on it. "The painting is by a renowned artist and its current value is about Rs 1 lakh. My friend gifted it to me when he realised I liked it, but I had no idea that I would have to pay for it, even if it was in the form of tax," says the 63-year-old.
According to the Income Tax Act (as well as the Direct Taxes Code, which is likely to come into effect from 1 April 2012), if you receive a gift whose value exceeds Rs 50,000, it will be clubbed with your income and you will have to pay tax on it.