Is there a gift tax in India – Exemptions on Gift Tax
It is very important to know and understand Gift Tax Rules in India. The Basic rule is – when you receive any gifts either as cash, movable or immovable property or in any kind from any person without consideration and even winning money from lotteries will be taxable under “Income from other sources” and be taxable.
Exemptions on Gift Tax in India
Under section 56(2) of Income tax act – Not all gifts would be taxable and there are few exemptions to this rule.
1. Gifts received from relatives are not taxable:
When you receive gifts from your relatives in any form including cash, cheques or gifts in any kind is totally tax free in India. Good news is, there is no maximum limit on the gift value and it is fully exempted from levy of gift tax.
Gifts received when you get married, or under a will or by way of inheritance are not taxable.
Your spouse, brothers-in-laws, sisters-in-laws, aunts and uncles (maternal or paternal) are considered relatives under Gift tax in India for tax exemption.However, if any interest generated from that gift will be taxable.
For example, if you’ve gifted your wife (house-wife) a cheque of Rs 1.5 lakhs and if he earns interest on it, this interest would be clubbed with your income.
2. Gift received up to Rs. 50,000 is not taxable:
If the value of the gift is below Rs. 50,000 in a year then you are not liable to pay tax for that gift. But, if the value is more than 50,000 in a year then you have to pay tax for the entire gift value. For example, if someone gifts you Rs 54,000 in a given year, then you will have to pay tax for the total amount of Rs 54,000 not just on additional 4,000.
3. Gift received on your Wedding is not taxable:
Any gift/amount received on your marriage either from your relatives or non-relatives are not taxable. There is no maximum limit on the gift value and it is fully exempted from levy of gift tax. However, it is exempted only to your marriage and not for your Son/Daughter’s marriage.
4. Gift received as WILL is not taxable:
Any amount or in any kind received as WILL are fully exempted from gift tax for the receiving person. For example, if you get a WILL worth Rs 10,00,000 and things worth Rs 20,00,000 through inheritance, you will not have to pay any tax on these and these are fully exempted under gift tax in India.
5. Gift tax on property received [Movable/ Immovable]:
As per income tax act, the following are considered as properties: Land, Building, Jewellery, Equity Shares & Securities, Paintings, Sculptures, and any other kind of art. For the movable properties, the fair market values would be considered, if fair market value exceeds 50,000 then it would be taxable under gift tax in India. For the immovable properties like building and land, the stamp duty would be considered under gift tax, if stamp duty exceeds 50,000 then it would be taxable under Income from other sources.
When there is an exchange of big gifts, it is always advisable to get the documentation done with the occasion details. It would be easier to convince the IT department at the time of tax scrutiny if all the written proofs are proper and ready.