The income tax return forms introduced for the financial year 2017–2018 were modified to accommodate the disclosure of gifts as well
Gift tax Representational image
Gifting a valuable asset during a wedding is quite common in India. However, it is crucial to know that these gifts attract a gift tax as per the Income Tax Act. Knowing how this works will help you understand the ramifications of your gift better and help you spread joy instead of worry. Why worry? It’s because the recipient might be the one bearing the responsibility of paying this tax. The income tax return forms introduced for the financial year 2017–2018 were modified to accommodate the disclosure of gifts as well. With the wedding season on, this is an apt time to understand how gifts are taxed in India.

Gift Tax On Money

In whatever manner you receive money without consideration, whether cheque, cash or a draft, you are liable to pay tax on it if it exceeds Rs.50,000 in a year. So, even if you receive money from guests at your wedding and the total is Rs.60,000, it will be added to your income and you will have to pay tax on it.

Gift Tax On Immovable Assets

While a home may seem like the ideal gift for people you’re close to, they will have to pay tax on it. Look at when this happens.

• If the immovable asset is gifted without consideration and the stamp duty exceeds Rs.50,000, the stamp duty is taxable.

• When an immovable asset has insufficient consideration and the difference in the stamp duty value and the consideration is more than Rs.50,000, the amount taxable is the difference between the consideration and the stamp duty.

Gift Tax On Movable Assets

Other common but valuable gifts include jewellery, works of art, shares and other investments, and more. While it is great to receive these gifts to receive, they are also taxable. Take a look at when you or the recipient will have to pay tax.

• If these gifts are given without consideration and their total value in a year exceeds Rs.50,000 then the entire value is taxable.

• When such gifts are given with consideration, if the current market value less consideration is greater than Rs.50,000, then this amount is taxable.

Gift Tax Exemptions

There is a silver lining to this system, so make the most of the exemptions to this rule when you’re gifting this December. Take a look at the cases where paying gift tax isn’t necessary.

• Gifts from a parent to their child

• Gifts from one spouse to another

• Gifts from one sibling to another

• Gifts from the spouse of your sibling

• Gifts from either parent’s sibling or their sibling’s spouse

• Gifts from either parents in law’s sibling or their sibling’s spouse

• Gifts from a lineal descendant or ascendant or their spouse

• Gifts from your spouse’s lineal descendant or ascendant or their spouse

Before you make your purchase or create a wish list of your own, use this tax information to understand the consequences of your choice.