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Thursday, November 23, 2017

Did you know: when gifts of monetary value are not taxed Normally, when you receive gifts they are taxable in your hands. However, there are several situations when you do not have to pay any tax on the gifts you receive

Image result for pics of people giving gifts

Gifts are welcome in any form. Among gifts, many people prefer to receive cash because they can use it as they want to. However, unless received from specified relatives, these gifts can be liable to tax. But here is some good news. Under certain conditions, even monetary gifts do not attract income tax in the hands of the recipient. Read on to know more.
Exempt conditions
Tax implications on gifts are covered under section 56(2) of the Income-tax Act, 1961. The Act provides that any gift received in excess of Rs50,000 in form of cash, demand draft, cheque or specified assets by an individual or Hindu Undivided Family (HUF) is taxable under the income tax head ‘income from other sources’. If its value exceeds Rs50,000, the whole amount is taxed. Remember that the tax applies not only to gifts received in cash, but also to those received in kind, such as: immovable property (including land and building) and specified movable properties such as jewellery, paintings, shares, debentures, bullion, and archaeological collections. The gift is taxable only in the hands of the recipient. However, below are certain conditions during which the gift does not attract tax.
Gifts from relatives: Any sum or property received, at any point of time, from certain relatives is exempt from income tax. According to the Act, these relatives include your spouse (husband or wife), brothers, sisters, brothers in-law, sisters in-law, parents, parents in-law, any lineal ascendants or descendants of the individual or spouse, and brothers or sisters of parents of individual or spouse.
Gifts at the time of marriage: Apart from gifts received from relatives for whatever reason, gifts received on marriage are also exempt from tax, irrespective of the relationship with the giver or value of the gift. 
Gifts to HUF by its members: An HUF is a Hindu family (including Jain, Buddhist and Sikh families) which consists of all persons lineally descended from a common ancestor, including their wives and unmarried daughters. Under section 2(31) of the income-tax Act, an HUF is considered a ‘person’, and therefore a separate entity for the purpose of tax assessment. An HUF consists of the karta, who is typically the eldest person or head of the family, while the other family members are considered coparceners. In case a coparcener (member) gifts some money to the HUF out of his or her individual wealth, it will be tax-free in hands of the HUF.
Gift through Will and inheritance: If a taxpayer receives any amount or asset under a Will or inheritance, that is also tax-free in hands of the recipient.
Other conditions: Apart from the above, any sum of money or property received in contemplation of death is also exempt. Besides that, any gift received from specified local authorities, funds, foundations, universities or other education institutions, hospitals, Trusts or charitable institutions is also exempt from tax
By Ashwani Kumar Sharma First Published: Mon, Nov 20 2017. 04 33 PM IST livemint

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