11 Nov 2020, 13:54 — 4 min read
It’s a matter of just a few days before we get to celebrate the ‘festival of lights’ we love so dearly. Right? However, the ‘air’ this time may be a touch different, courtesy, the COVID-19 pandemic. Yes, the ‘bug’ is still in the air and we may miss some of the vigour associated with Diwali this time around. Let’s see what is Income Tax on Diwali gifts?
But, there is one thing that’s not going to change; come what may! Any guesses? You are right! It’s ‘gifts’.
We Indians like to express our warm feelings/gratitude for each other through gifts during ‘Diwali’. You must have made your ‘gift plans’ ready by now. You may be expecting some delightful gifts to come your way as well. But, have one thing crossed your mind so far? The taxation part of ‘gifts’?
The income tax rules say you need to report any income other than salary (like the gift, prize, lottery etc) to the taxation department in your ITR. The Income Tax Act 1961 specifies all types of receipts as individual earnings and gifts are no exception. The gifts may be of any form- jewellery, cash, shares, and any other movable and immovable property. If the value of the gifts you receive in a financial year exceeds Rs 50000, the entire amount will be taxed as a part of your income.
To add to this, if you have received any gift (in the form of cash or kind), the same needs to be reported in the ‘income from other sources’ head in your ITR. Such receipts will be taxed as per the tax slab applicable to you. Also, 4% of cess will be charged on them. No allowance or deduction (u/s 80 C or 80 D) is permissible on such an income.
Also read: How to pay your Income Tax using Challan 280
Section 56(2) of the IT Act says that tax is exempted if you receive gifts from your relatives. But you can’t just show any ‘giver’ as your relative. To avoid any ambiguity, the Income Tax rules have promptly specified persons who can be considered as ‘relatives’ for this purpose. These include-
Please note: Gifts received from friends are taxable.
Also read: Benefits of filing Income Tax Returns (ITR)
Hope the above gave you enough idea about the taxation part of gifts. So, you can now ‘tweak’ your gift plans accordingly. Enjoy all the festivities!
Happy Diwali in advance!
Also read: Buy unique Diwali gifts online this season
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Posted byVakilsearch Staff
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