It was the day of your marriage when you were greeted by many of your friends and relatives and they offered cash gifts in the form of their blessings and a beautiful start to your new beginning.
You were delighted to receive so many gifts but many questions arose in your mind like whether to keep all this cash in your house which would be unsafe, or to deposit it in the bank, if you deposit it in the bank then will it be added to my income, if it will be added to your income will I have to pay tax on it, if you will have to pay tax on it how much will it come to? what is the tax on a cash gift? Will it be taxable even if received from relatives or only from friends and others? And you kept talking to yourself until you came across this blog which will take you through each of your questions step by step.
Believe me, you are not the only person to come across these thoughts but there are many others including me, who have mixed feelings about receiving gifts about its taxability and exemption from tax.
Did you receive a gift for your marriage from anyone?
Yes!
Then you can enjoy it without any tax implications.
Similarly all the following will not attract any tax liability, if you have received
- Cash or
- Land or Building or both,
- Property, Shares and securities, jewellery, archeological collections, drawings, paintings, sculptures, any work of art, or bullion
From your relatives, or on the occasion your marriage; or you are lucky enough to receive a gift under a will or by way of inheritance; or from a person who is ill or is about to die due to illness; or from local Government, Trust, NGO institutions, hospitals, universities to name a few.
Gift From Non-Relatives
Income tax on gift money
If you have received a gift from non-relatives on your anniversary, say Shelly Rs.30000, Bharat Rs.15000, Ramesh Rs.15,000 total to Rs.60,000 which exceeds Rs.50,000/-. Then the entire Rs.60,000 will be taxed under Income from Other Sources.
Income tax on gift of immovable property from non-relatives
You have received Land/Building as Gift Case1: Completely Free or Case2: have paid some amount,
Case 1: Without Consideration
If you receive a property without paying anything for it (it’s free), and its Stamp Duty Value is less than Rs. 50,000, then you don’t need to pay any taxes for that specific property. This calculation applies to each free property you receive.
Case 2: Inadequate Consideration
Another case is if you have paid less than the Government value.
Imagine you bought an apple orchard for Rs. 70,000. The government, however, values the orchard at Rs. 76,000 (Stamp Duty Value or SDV). So, the difference between what you paid (Rs. 70,000) and the SDV (Rs. 76,000) is Rs. 6,000 (76,000 – 70,000).
Now, compare this difference with two options:
- Rs. 50,000
- 10% of what you paid for the orchard (Consideration) – 10% of Rs. 70,000, which is Rs. 7,000.
Since Rs. 6,000 (the difference) is less than the higher limit of Rs. 7,000, you’re exempt from paying any additional taxes. It’s like saying, if the difference in what you paid for the orchard and what the government values it at is less than the higher limit set, you’re in the clear – no extra taxes for you!
Income tax on gift of movable assets from non-relatives
8 Specified Assets (like 8 best Friends): Shares and securities, jewellery, archeological collections, drawings, paintings, sculptures, any work of art, or bullion as Gift
If you have received any of these 8 assets from Non-relatives, it will be taxed under Income From other Sources depending on Case1: Completely Free or Case2: have paid some amount,
Case1: Without Consideration
Let’s simplify this using jewellery as an example:
If you receive jewellery for free, and the total government value of all the pieces is more than Rs. 50,000, the entire amount becomes taxable.
Case 2: Inadequate Consideration
Additionally, if you paid Rs. 4,00,000 for the jewellery, which is less than the government value of Rs. 5,00,000 and the difference (Rs.1,00,000) is more than Rs. 50,000, the whole difference (Rs.1,00,000) becomes taxable.
Gift From Relatives
Income tax on gift received from parents
Parents like to gifts to their daughters and sons on every occasion. Parents are your blood relations and very much covered within the definition of Relatives, any gift received from parents is completely exempt from Tax.
Income tax on gift from father to married daughter
A gift received from the father in the form of his blessings to you even after your marriage qualifies for exemption. Such Gifts from dear Dad are exempt from tax even to a married daughter since your father continues to be your lineal ascendant even after your marriage.
Income tax on gift from relatives
You might have received gifts from anyone in your family be it your Great granddad to great grandson on various occasions You might be wondering who all fall under the Income Tax definition of relatives so that any money or Land/Building or 8 specified assets received from them will be exempt from tax.
Who is a relative?
Let us understand the relatives of Hema (Individual)-
Hema’s husband (Amitabh), Hema & Amitabh’s brother & brother’s wife and Sister and sister’s husband, Hema’s Bua’s & Bua’s husband, Hema’s Chacha/Tau & Chacha/Tau’s wife, Hema’s Mama & Mama’s wife, Hema’s Mausi and Mausi’s husband, Lineal ascendant/descendant of Hema & Amitabh- Great grandfather/Grandfather/father/Great Grandmother/ Grandmother/ mother/ son/grandson/great grandson/ daughter/granddaughter/ great-granddaughter & their respective spouses.
Conclusion
All gifts received on the occasion of your marriage are always completely exempt from income tax and You can use it as it is or deposit in bank without any tax liability. such exempt income is to be shown under exempt income in the Income Tax Return to avoid Scrutiny later.
Have you received a Gift and you are confused whether it will be taxable or not, please feel free to send me a mail at incometax@tanujagupta.com