Read on to understand the tax implications of gifts received from relatives
Quite often parents or relatives send gifts or cash amount to children during special occasions or festivals. During such times, a very common question would be whether the amount received as a gift has any tax implications. Well, if the amount received as a gift is more than Rs 50,000, then the entire amount received will be taxable. The amount is added to your taxable income and taxed as per your slab. But there are exceptions.
As per the Income Tax Act, money received as a gift from certain relatives is tax-free irrespective of the amount. That means the amount received from husband/wife, son/daughter (including stepchild and adopted child), father/mother (including step-father/mother), daughter-in-law/son-in-law, brother-in-law (and his wife), sister-in-law (and her husband) is tax-exempt. Beyond this, if you receive any gift from non-relatives such as friends, step-brothers/sisters, nephews/nieces and cousins, and the value of the amount received is more than Rs 50,000, then the entire amount is taxable.
For instance, a gift of Rs 30,000 received from a friend is not taxable since it is under the threshold of Rs 50,000. But if you receive Rs 60,000 as a gift from a friend, then the entire amount is taxable as it exceeds the threshold. This amount is added to your taxable income.
There are several other situations where gifts are exempted from tax irrespective of whether the gift comes from a relative or not. One situation would be on the occasion of marriage. Do note that only the gifts received by the bride and groom are exempted and not the parents of the couple. However, the amount received on other occasions such as birthdays and parties is still taxed. Also, if you receive any amount as a part of any reward by local authorities or educational institutions based on merit, they are exempted from tax.
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