As the wedding season kicks off in India, the exchange of gifts is a common practice. However, it’s crucial to be aware that you may be liable to pay taxes on gifts received during weddings. The Income Tax Act of 1961 contains provisions on this matter. Many individuals unknowingly accept gifts, only to later receive an income tax notice. In this article, we’ll explain what you need to know to enjoy your wedding while being tax-savvy.
Understanding the Law
First, let’s clarify what the Income Tax Act of 1961 entails. According to this Act, gifts valued at less than Rs 50,000 are not subject to taxation. Gifts exceeding this threshold are taxable at a rate of 30 percent. Now, you might wonder whether gifts in the form of property or shares are also taxable. The answer is yes.
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The rule dictates that if the gift giver is not a blood relative, and the gift amount is above Rs 50,000, you will be required to pay a 30% tax. However, if the gift giver is a blood relative, you won’t have to pay tax, even if the gift exceeds Rs 50,000.
What About Gift Transfers?
Another important aspect to consider is the tax rules when you transfer a received gift. If you receive shares as a gift and then transfer them to someone else, it is considered a capital gain. You will be required to pay tax on it in accordance with the Capital Gains Act of 1961.
Therefore, while celebrating your wedding in style, it’s essential to keep track of the gifts you receive and their respective values to ensure that you can avoid any potential tax notices in the future.
