According to the Income Tax Act, tax has to be paid on taking gifts of more than the prescribed limit.
Diwali is such a festival in which people get gifts from relatives, friends, neighbors and offices. But you will be surprised to know that all the gifts received during Diwali or this festive season are not tax free, you will have to pay tax on gifts. It is very important to keep in mind the Income Tax rules while taking gifts on Diwali.
Prescribed Limit Under Income Tax Act
According to the Income Tax Act, If you take a gift of more than Rs 50,000 from a relative or friend who is non-exempted, then you will have to be pay tax on gifts. If you receive a gift from a non-exempted relative or friend, then you have to report it at the time of filing income tax return.
Suppose if you receive a gift of 30,000 from one friend and 25000 from another friend and no other gift has been received in that year. So, you have received a gift of Rs 55,000 in that financial year, which is more than Rs 50,000, then you will have to pay tax on gifts on the entire amount of Rs 55,000.
Gifts Received from Employer to Employee
Offices also give gifts to their employees on Diwali, which is different from Diwali bonus. According to the Income Tax Act, if the value of the gift received from the office does not exceed Rs 5000, then you will not have to be pay tax on gifts. And if you take a gift of more than Rs 5000, you will have to pay tax on gifts.
According to 56 (2) of the Income Tax Act, not pay tax on gifts if gifts receive from these relatives, irrespective of the value of the gift.
- Husband or wife
- Brother or sister
- Brother sister’s husband wife
- Guardian of the taxpayer
- Parent’s brother or sister
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