We will celebrate Diwali today (October 24, 2022) and we are all going to exchange gifts as well. But some individuals are unique as they are going to be rewarded with a few expensive ones from their employers, family members, friends, business partners, or any closed one. However, with these presents also comes tax liability.
Tax Liabilities on Diwali Gifts
Until and unless your Diwali gifts fall under exempted categories they will be taxed under Section 56(2) of the Income Tax Act, 1961, as they are not considered your direct income.
Tax Rules on Gifts From Relatives
“Any gift received from relatives is tax-exempt if the relatives come under the definition of ‘relative’ for this purpose under the Income Tax Act.”
“For this purpose, ‘relative’ means the spouse of the individual; brother or sister of the individual; brother or sister of the spouse of the individual; brother or sister of either of the parents of the individual; any lineal ascendant or descendant of the individual; any lineal ascendant or descendant of the spouse of the individual; and their spouses.”
Tax Guidelines on Gifts From Friends
Gifts from friends are marked as ‘income from other sources. “They are added to your income and tax is charged. However, the tax is levied when the value of the gifts crosses Rs 50,000 in a year. There is no tax on gifts worth less than Rs 50,000 a year.”
Remember, gifts received on the occasion of marriage are exempted under tax rules.
Tax Rules on Gifts From Employers
“Gifts from the employer attract tax if they cross Rs 5,000 in a year. Gifts worth below Rs 5,000 in a year from employers do not attract tax. The gifts above Rs 5,000 are considered ‘perquisites’ and taxed accordingly.”
Types of Property As Diwali Gift
“The difference between the consideration of the property (movable or immovable) and the value of stamp duty will be considered a taxable gift if received for inadequate consideration. It has an exempt value of Rs 50,000. So, if the difference is less than 50,000, the transfer will not be considered a taxable gift,” mentioned news18.
According to the Income Tax Act, 1961, “an immovable property received without consideration by an individual or HUF will be charged to tax if the immovable property (being land or building or both) is received by an individual/HUF; is a capital asset within the meaning of section 2(14) for such an individual or HUF, and the stamp duty value of such immovable property received without consideration exceeds Rs 50,000.”