The gifts that you receive both in terms of money or in other forms are exempted from tax if their total amount in a given financial year is less than Rs 50,000. A gift above this value makes you liable for paying income tax only on the amount in excess of Rs 50,000.
"If the value of the gifts received by you exceeds Rs 50,000 in a year, it will be taxable under the head "Income from other sources" and will be taxed according to the individual's tax slab," says Archit Gupta, founder and CEO, Cleartax.
If the gift amount is significant, chances are you will end up paying the highest tax rate of 30 per cent on your gift. So, if you receive a gift of Rs 5 lakh, you may have to pay Rs 1.5 lakh excluding cess and surcharges as income tax.
However, there are some instances when receiving gift is completely tax-free. You should be aware of these exceptions to plan your gifts accordingly to save taxes.
Receiving tax free gifts
The first exception is when you receive gifts on certain specified occasions or manner. For instance, gifts received on the occasion of your marriage and by way of will or inheritance are exempted from tax. If a person contemplating death, who wants to dispose of their assets, gifts you something, it is exempted from tax. Besides, there are certain specified institutions from which any gift received is exempted from tax.
Relatives from whom you can receive tax free giftsAnother gift that is completely exempted from tax is when you receive it from your close relatives. However, only specified relatives fall under this category.
You can receive tax free gifts only from your spouse, lineal ascendants and descendants, your brother or sister, lineal ascendant or descendant of your spouse, brother or sister of your spouse and spouse's all relatives mentioned earlier.
