Everything you need to know about taxes on gifts and exceptions

However, there are some notable exceptions that individuals should take into account. We discuss taxation rules Gift And these exceptions in detail.

Firstly, experts suggest that the donor should ensure that the gift is genuine and does not involve any black money and money laundering. They also recommend that gifts of high value should be registered through a deed by paying certain charges, which vary from state to state. This is advisable because if there is scrutiny from the tax authorities in future, a person should be able to prove the genuineness of the transaction as a gift and not a sale-purchase transaction.

In terms of tax compliance, the gift is not taxable in the hands of the giver, but if you are the recipient then you need to take into account certain classifications. As mentioned above, gift received by any individual is taxable, however, there are some exceptions to this.

As per government rules, some close relatives like husband/wife, son/daughter (including stepchild and adopted child), father/mother (including stepfather/mother), daughter-in-law/son-in-law, brother-in-law (and his wife), sister-in-law (and her husband) is exempted from paying tax on the receipt of gift. A half-brother/sister, nephew/niece and cousin shall not be treated as ‘relatives’ for the purpose of this provision.

However, in case of non-relatives, a receiver has to pay tax if the value of the gift exceeds 50,000 within a year. However, there are some exemptions to this rule as well.

“Gifts received from non-relatives on the occasion of marriage are exempt from tax. But note that only gifts given to the bride or groom are exempt. If, the gift is given to the parents of the couple, the tax will be levied,” said Naveen Wadhwa, Deputy General Manager, Taxman.

Note that gifts given by non-relatives on other occasions like birthdays and housewarmings will be taxed if the value exceeds 50,000

Further, in contemplation of death, where the gift is made by someone on the death bed, in the hands of the giver or recipient is exempt from tax.

In respect of Indian residents, a recipient, if taxable, has to show the gift in the income tax return and pay tax as per the slab rate.

Note that gifts are classified as money, immovable property and movable property. All these classes have different limits and are not cumulative.

“For example, if you get 40,000 as paise and 40,000 as an asset, there will be no tax liability. However, if you get 51,000 paise, the entire amount will be taxed as per your slab rate,” Wadhwa said.

Notably, under the movable asset category, which includes shares, bullion and art, the government has added virtual digital assets or crypto assets to the list from next year.

For non-resident Indians (NRIs), the government had clarified that they would have to pay tax on gifts received under Section 56, which lays down the rules for taxation. Further, in terms of compliance, a resident gift giver has to deduct tax at the rate of 30% at the time of gift giving to an NRI. The same exemption is applicable to NRIs. For example, if you send 55,000 to your NRI brother, you do not need to deduct TDS and the recipient does not have to pay tax in India as the exclusion under the relative rule will be applicable. However, while gifting to an NRI friend, you will have to deduct TDS and pay tax to the friend.