Taxation on Gifts Received- How Various Sources of Gifts Taxed

According to the provisions of the Income Tax Act, gifts received are taxable income. However, income tax was not applicable on gifts until the financial year 2003-04. The Income Tax Act was amended in 2004 to ensure the taxability of gifts. Currently, any amount received in cash or on credit by an individual or HUF from an unrelated person in a fiscal year will be included as income. Let's take a look at the taxation of the gifts received.

Gifts from a relative -

The gifts from relatives such as spouse, brothers/ sisters (and their spouses) of the individual/ individual's spouse/ individual's parents, lineal ascendants/ descendants (and their spouses) of the individual/ individual's spouse are not taxed

Gifts received in Marriage-

The Gifts received in the marriage of the individual are not taxed.

Inheritance Willed to be carried out

Income tax does not apply to money received by will or inheritance. As a result, no income tax will be levied on any movable or immovable assets inherited as a result of the death of a relative.

Money Received in Death Contemplation

Similarly to inheritance, money received in anticipation of the death of an individual, Karta, or member of a Hindu undivided family is exempt from Income Tax.

Gifts received from friends-

The gifts received from friends will be charged whereas gifts received from the relatives are not taxed.

Gifts/money transfers with tax consequences for the giver

The gift/value of the asset is taxed in the hands of the recipient.

Gifts received from abroad-

If the value of the gifts received exceeds by an individual exceeds 50000 in a year then in that case it is charged whether from india or abroad

Individuals must evaluate their transactions to see if they fall under any of the taxable scenarios discussed above. If they answered yes, they should voluntarily disclose the income in their individual income-tax returns as needed to ensure compliance.