How to ensure your Gifts are exempted from Gift Tax in India?

Everyone loves to receive presents. Gifts are also a way to express our happiness and affection in India. Every birthday is incomplete without presents from parents, friend, and relatives. Especially in marriages, gift is given both as cash and expensive items. As we know we need to pay taxes to the government of India for most of the things but do we need to pay gift tax also?

Broadly speaking, following fall under the criteria of gift tax

  • Movable Property – jewelry, vehicles, sculptures, paintings etc.
  • Immovable Property – Land, houses, flats, buildings etc.
  • Cash
  • Cheque receipts

Section 56(2) of Income Tax Act sets the criteria for gift tax in India. According to it, all presents exceeding Rs 50,000 per annum are levied for tax in India. The receiver of this amount is liable to pay the taxable amount.

Exceptions in gift tax are for presents received from relatives. Income tax department has also specified list of persons who are considered as relatives for free gift tax –

  • Parents and Spouse
  • Brothers and sisters
  • Spouse’s brothers and sisters
  • Lineal ascendants and descendants
  • Spouse’s Lineal ascendants and descendants
  • Parents’ brothers and sisters.

Following are some other cases of gift tax exemption

  • In cases of presents inherited from parents or via will, you are not supposed to pay any gift tax.
  • Any kind of present received by a person or spouse on their wedding. No tax is levied even on amounts higher than Rs 50,000.`

Presents received by either of your parents or siblings on your wedding are also exempted from tax.

One can also get various benefits from gift tax exemptions as follows-

  • You can present an interest-free loan to your children of age 18 yrs. or more.
  • An investment or amount can be gifted to siblings or parents in cases where their income is lesser than income tax slab.
  • All the income earned from given amount or property is not clubbed with donor’s income if it is tax-free.

There are few other things to keep in mind while giving or receiving presents. Always keep supporting documents like bills for gifts received or given. A Gift Certificate has to be produced for exemptions.

Donors must provide stamped documents for any kind of movable asset. It has also to be attested by at least two witnesses. Same is the case for immovable assets. Additionally; donor has to register that property in receiver’s name.

In a nutshell, we must have proper knowledge on all the norms of gift tax in India. In this article, we have tried our best to mention all the important clauses related to it. You can connect with us in case you have further queries or if you are about to receive or give a gift to someone.