Diwali is near. Soon people will start giving gifts to each other. Employees receive gifts from employers on the occasion of Diwali. Shopkeepers give gifts to customers. Gifts are also exchanged between friends and relatives. It is important for you to know that some gifts are taxable. However, these are not part of your direct income. These come under Section 56(2) of the Income Tax Act, 1961. It is important for you to know about gift tax rules. Many people are not aware of this, due to which they fear getting into trouble.
What is the definition of relative in the case of income tax?
Gifts received from relatives are not taxable. However, it is important to know which relationships come under the ambit of relatives as per income tax rules. As per income tax rules, relative means spouse of a person. A person’s brothers and sisters also come under relatives. Brothers and sisters of a person’s spouse also come under relatives. This means that if someone related to this relationship gives you a gift, it will not come under gift tax.
Gifts received from friends are taxable
A gift received from a friend is taxable. This means that if one of your friends gives you a gift on the occasion of Diwali, its value will be added to your income. Then you will be taxed as per slab. But there is a condition. That is, if the value of the gift exceeds Rs 50,000 per annum, it will be taxable. Gifts worth less than Rs 50,000 in a financial year are not taxable. The Income Tax Department has given a big relief that gifts received on the occasion of marriage will not come under the purview of tax.
Tax is also levied on gifts received from the employer
Gifts received from employers to employees are also taxable. But there is a condition for this. Gifts received from an employer are taxable only if the value exceeds Rs 5,000 in a financial year. This means that if a gift less than Rs.5000 is received from the employer, it will not be taxable.