But beware... you could possibly be violating the dreaded Income Tax Act. Yes, in case you are not aware, you could be liable to pay tax on the gifts that you receive.
So here's a quick look at some of the key provisions of Gift Tax that you must know.
1. Gift is something that you receive without paying for it i.e. it comes without any consideration.
2. Gift can be of three types
- Cash / Cheque
- Immovable property i.e. land / building
- Movable assets such as shares, securities, gold, silver, jewellery, paintings, sculptors, etc.
3. There is NO tax on gifts as long as the "total value" of ALL the gifts put together, that you receive during any financial year, does not exceed Rs.50,000. The moment it exceeds this limit, the entire sum becomes taxable (and not just the amount in excess of Rs.50,000).
4. This limit of Rs.50,000 is, however, NOT applicable if you receive gifts
- from a "relative"
- on the occasion of marriage
- under a will / inheritance
- in contemplation of the death of the donor
5. Relative, as per IT Act, is defined to include your (a) spouse and (b) sibling of self / spouse, siblings of either parents, lineal ascendant / descendant of self / spouse and spouses of these persons.
6. Taxable value of the gift(s) is to be added to your income and taxed according to your income slab rate.
7. Gifts received by your children would also be taxable. It has to be clubbed with your spouse's or your income, whosoever earns higher income.
8. Proper documentation is a must, just in case your Income Tax Assessing Officer raises any queries. For cash gifts, a simple note signed by the donor may suffice. For movable properties, gift deed on stamp paper and duly notarized would be required. And for immovable properties a 'registered' gift deed is mandatory.
