Indian festivals are incomplete without exchanging gifts. A large number of gifts ranging from cash, gold, diamonds, financial gifts such as stocks, land, etc. they are exchanged between friends and family. Gifts you receive may not always be tax-free. You will be required to pay tax on them if the value of the gift exceeds ₹ 50,000. Gifts received up to ₹ 50,000 are completely tax-free, but if this amount is exceeded, the total amount of the gifts becomes taxable. For example, if you have received gifts worth ₹ 55,000 during a financial year, the total amount of ₹ 55,000 will be taxed under the heading “income from other sources”. Section 56 (2) of the Income Tax establishes the taxation of gifts received during the year in case the added value of all gifts, whether in cash or in kind during a year, exceeds fifty thousand rupees.
The limit amount of ₹ 50,000 applies to the total of gifts received during a financial year. The taxation of the donation is determined based on the added value of the donation received during the year and not on the basis of the individual donation. If the total value of gifts received during the year exceeds ₹ 50,000, the total value of such gifts received during the year will be taxed.
Gifts received from family members are exempt from tax. by virtue of article 56 of the Income Tax Law. According to the Information Technology Law, the following people would be considered as relatives: spouse, brother or sister, brother or sister of the spouse, brother or sister of either parent, any linear ascendant or descendant, any linear ascendant or descendant of the spouse, spouse of the persons mentioned above.
Friends are not classified as “relatives” and any gifts received from them are taxable.
Also, gifts received at the time of marriage are exempt from tax. But, gifts received on occasions like birthdays, anniversaries, etc. of an individual will be taxed.
Gifts received by way of will and gifts received in contemplation of the donor’s death are also tax-free.
How to tax real estate received as a gift?
Stamp duty on real estate is taxable if the value of stamp tax exceeds the consideration value of real estate by at least Rs 50,000.