Gift tax rules explained: When cash, wedding gifts, jewellery and property become taxable?

Seema thought the jewellery and cash gifts she received from a family friend were completely tax-free—until she received a tax notice. Since the total value exceeded ₹50,000 and was not declared, it became taxable in her hands. Many taxpayers make the same mistake while accepting gifts as they are completely unaware how they are taxed.

How are gift taxed?

Any gifts received (in form of cash, movable property or immovable property), which exceeds ₹50,000, the entire value of gift is taxable in the hands of the recipient.

For example, if you receive a gift worth Rs. 80,000 in a tax year, then you are required to pay tax on the full amount. However, if it is less than Rs. 50,000, then you are not liable to pay tax.

What are exempts, what are not:

• Gifts received of any value from relatives (like spouse, parents or in-laws) specified in the law is exempt, but the same is true for non-relatives (except employer) only if they are received on special occasions like marriage.
• In case if an income is arising out of that gift from a close relative, then the amount is again taxable.

Here's look at what are tax free limit each financial year, how different gifts are taxed, and other details:

What are tax free limit for per year?

Tax-free limit for the gifts received from friends is ₹50,000 per year. For example, if you have received two gifts worth ₹30,000 each, then you are breaching that Rs. 50,000 exemption limit and would be taxed for Rs10,000.

How wedding gifts are taxed?

When it comes to gifts received during a wedding, they are tax exempted tax under Section 56(2)(x) of the Income-tax (I-T) Act

However, there is a complete constraint on accepting any amount in excess of ₹2 lakh in cash on a single day. So though there is no rules do not specifically require that such gifts should be received on the day of the wedding, it is advised it should handed over within a reasonable period – say, six months between your engagement and wedding

How gift voucher from employers are taxed?

If a gift received from an employer in the form of gift vouchers, tokens on festive occasion like Diwali exceeds ₹5,000, then it is considered as part of your salary and taxed as per your tax slab.

However, in case the employer presents you with cash, then there is no tax exemption.

How properties are taxed?

Immovable property (land or building), which is received without monetary consideration, usually needs to be registered and taxes are expected to be paid in certain cases.

The recipient is required to pay income tax if the stamp duty value, or circle rate, of the property exceeds ₹50,000. Additionally, if the property is purchased for a price lower than its stamp duty value by more than Rs50,000 or 5% of the consideration—whichever is higher—the excess amount is treated as taxable income in the year of receipt.

How jewellery, archeological collections, art of works are taxed?

Movable assets such as jewellery, archaeological collections, drawings, paintings, sculptures, and other works of art are also subject to tax. If these items are received as gifts without any consideration and their fair market value exceeds ₹50,000, the entire fair market value is treated as taxable gift income in the year of receipt.

• In case of transfer of movable or immovable property in form of a gift, a gift deed (document) needs to be prepared to records the act.
• The deed should mention that the gifting process was a voluntary action made without any kind of coercion.
• It is always crucial to maintain a record of gifts as well as documentation of assets you hold, in the form of gifts received.