Income Tax News: We’ll provide advice on how much money can be given as a gift without triggering any tax liabilities. Section 56(2)(x) of the Income Tax Act, 1961 (the “IT Act”) states that if an individual receives more than Rs. 50,000 in total during a given Financial Year without receiving any consideration, the amount will be subject to tax under the heading “Income from Other Sources.”
Tax Implications Unveiled
Put simply, during a given financial year, if a person gets monetary gifts from one or more people totaling more than Rs. 50,000, the sum will be subject to taxation at the individual’s applicable slab rates. Therefore, as far as income tax is concerned, nothing will happen if the total amount of money received as gifts in a given fiscal year is less than Rs. 50,000.
Reporting Cash Gifts from Employers
It is also important to remember that if an employer gives a cash gift to an employee, the entire amount received as a gift—even if it doesn’t exceed Rs. 50,000—must be reported as income from salary and is subject to taxation. Additionally, in accordance with Rule 3(7)(iv) of the IT Rules, gifts in kind, such as vouchers, hampers, or tokens, that an employee gets and whose total worth exceeds Rs. 5,000 in a fiscal year are taxable as perks under the heading “Salary.” The gift in kind shall not be subject to tax if the total value is less than Rs. 5,000.
Tax Provisions for Gifts
Section 56(2)(x) of the IT Act contains provisions for gifts of cash or kind, as well as moveable and immovable property. These provisions are summed up in the following table:
|1.||Amount of money obtained without any thought||Aggregate value exceeds Rs. 50,000 in a Financial Year (“FY”)||Total amount of funds received|
|2.||Some Movable Property (Jewellery, Stocks, and the like) Acquired Without Recompense||Aggregate FMV exceeds Rs. 50,000 in a FY||Whole FMV of the asset|
|3.||Receiving real estate without giving it any thought||Stamp Duty value of the said property exceeds Rs. 50,000||Total Stamp Duty Amount of the Asset|
Tax Implications for Gifts
Based on the table above, it may be deduced that gifts exceeding Rs. 50,000 in value, whether in the form of cash, moveable or immovable property, will be subject to income tax. Nevertheless, the IT Act makes it clear that if a person receives gifts from any of his or her relatives, the rules of Section 56(2)(x) will not apply. Additionally, a precise definition of “relatives” has been provided. As a result, any presents from these particular relatives would not be taxable.