Gifts that are taxed (and not)

You may think you are gifting out of love, but in some instances, gifts can invite the taxman to your doorstep.

So, let's look at how gifts can actually become a part of tax planning.

What are 'gifts' as per the Income Tax Act?

• Monetary (cash, cheque or received through electronic mode)
• Immovable property (land or building or both)
• Specified movable property (shares/securities, jewellery, bullion, paintings or any work of art)
• No tax is applicable on other gifts like television, car and so on.

These gifts are non-taxable

• If they are a marriage gift
• If they are received under a will
• If they are received through inheritance
• If they are given by a person in anticipation of his/her death
• If they are given by a relative*

However, gifts given on other occasions are taxed
Case 1: If you receive gifts worth more than Rs 50,000 from one or more sources

The entire amount is taxed.

Case 2: If you receive an immovable property (land, building, etc.) as gift and you don't pay anything for it

The government will tax you as per the stamp duty value of the property, which is calculated by the local government authority.

However, you don't need to pay tax if the stamp duty value is less than Rs 50,000.

Case 3: If you receive an immovable property as gift but you pay a certain amount for it

Let's assume you pay a certain amount for the gift but the difference between the stamp duty value and the money paid is over Rs 50,000, you are liable to pay tax on the difference amount.

For instance, if the stamp duty value of the property is Rs 10 lakh and you paid Rs 2 lakh for it, your taxable amount will be Rs 8 lakh.

Case 4: If you receive movable property (such as jewellery, stocks, etc.) worth more than Rs 50,000 as gift from one or more sources

You will be taxed as per the fair market value of the property.

Case 5: If you receive movable property from one or more sources and you pay for it

Let's assume you pay a certain amount for the gift but the difference between the fair market value and the money paid is over Rs 50,000, you are liable to pay tax on the difference amount.

For example, you receive gold worth Rs 1 lakh and you pay Rs 25,000 for it. In this case, your taxable amount will be Rs 75,000.

However, if you pay Rs 60,000 for the gift, the difference amount is Rs 40,000. In this case, you are exempted from paying tax as the taxable amount is below Rs 50,000.

Point to remember
As per the current laws, gifts received by you from any person or persons are added to your income in that particular year and taxed as per your tax slab rates.

*Relatives include your and your spouse's family members. However, friends and cousins are not included.

Suggested read:
Is a monetary gift received from parents taxable?
Gifting your family can be taxing in more ways than one