Everyone likes receiving gifts, but sometimes these come at a cost. Gifts can mean an additional tax liability in the hands of the receiver.
As per the Income-tax Act, gifts up to Rs50,000 in a single fiscal year are exempt from tax. However, if the value of the gifts received in a fiscal year exceeds Rs50,000, you will be liable to pay a tax on the entire amount. The value of the gift will be treated as income from other sources and taxed as per your tax slab.
How to assess the value of the gift
The value of the gift is its market value on the day it changed hands. If it is an immoveable property, you can get its value assessed from a property assessor. If it’s a piece of art, then from an art assessor. If the gift is any financial asset such as a share, then it is the market value of the asset on that day.
Gifts received on certain occasions are, however, exempt from taxes.
Gifts received on the occasion of your wedding are tax-exempt. However, gifts received on occasions such as birthday, anniversary, naming ceremony and thread ceremony will be taxed.
Gifts given by blood relatives are tax-exempt. Blood relatives include your spouse, siblings, spouse’s siblings, parent’s siblings, your spouse’s or yours lineal descendants or ascendants such as your parents, grandparents, children and grandchildren and the spouses of all those mentioned above.
Gifts made by a dying person or anything you inherit as a legal heir or beneficiary through a will are not taxed.
Lastly, gifts received from a registered trust, non-governmental organization, or educational institution are exempt. For instance, scholarships.
what happens if you don’t pay
If you don’t reveal the gifts made to you when you file your income-tax returns, or under value the worth of the gift, then you could be charged for concealment by the assessing officer concerned. In such an event, you would have to pay the tax and also interest, if any. In addition to this, you will also have to pay a fine that may be imposed on you.