Home Business Certain Diwali gifts you receive may be taxed, see details

Certain Diwali gifts you receive may be taxed, see details

Some gifts received on Diwali may be taxed, know more

The festival of Diwali is about to spread smiles and happiness. People also exchange sweets and gifts with their relatives and close friends during this time.

Bonuses, gifts and sweets are given to the employees in the offices also.

While it has become an essential part of Diwali celebrations across the country, many are unaware that gifts received in a financial year can be taxed under the existing provisions. Income Tax (IT) Law.

As per the Income Tax Act, certain gifts can be taxed on the basis of their value and from whom you have received them.

In case the gift accepted by you does not fall in the exempt category, you will have to disclose the same at the time of filing Income Tax Return (ITR).

When the aggregate value of gifts to an individual exceeds Rs.50,000 in a financial year, it will be subject to tax as per section 56(2) of the Income Tax Act.

These gifts can be in the form of cash or kind. However, gifts given by close relatives or family members are exempted from tax. This means that you will not have to pay tax on gifts from your brother, sister, parents and spouse.

However, the definition of relatives does not include friends; Thus, gifts received from them fall under the category of “income from other sources” and are subject to tax as per applicable tax slabs.

Gifts are classified into different categories on the basis of their nature.

Gifts such as cash, drafts or checks are treated as monetary gifts and can be taxed if the aggregate value exceeds Rs 50,000 in a financial year.

If the gifts are given in the form of land or building, they are considered immovable property. Here, the gift becomes taxable if the stamp duty value of the property exceeds Rs.50,000.

Meanwhile, gifts such as jewellery, paintings, drawings, shares/securities, and collections are movable assets and are subject to tax if the fair market value of the goods received by an individual exceeds Rs 50,000.

While jewelery is taxable, motor car given as gift is not included in the definition of assessed movable property and thus cannot be charged to tax.

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