While filing the income tax return, some amount was found deposited in Dinesh’s bank account. After questioning him, he said that he had received a gift from his mother’s uncle. The mother asked her uncle to directly transfer her gifted money into her son’s bank account, who deposited the money in Dinesh’s bank account. However, since the mother’s uncle relationship is not included in the definition of income tax law, Dinesh had to pay income tax on the amount received as a gift. If Dinesh’s mother had taken the gift from her uncle first and given to Dinesh, both Dinesh and his mother would not have had to pay income tax on the amount received as a gift.

Keshav made a Gift Deed so that his son and daughter would get the rent from his properties. As property remained in Keshav’s name, Keshav had to pay the income tax on the rent, and the amount collected in the children’s income tax return was shown as a tax-free gift. If Keshav had made his property in the name of children, Keshav would not have had to pay income tax on this rent amount. Moreover, the children would not have to pay income tax on the value of the property which they received as a gift from their father.

Both of the above examples are part of daily routines. Let’s discuss and understand some of the provisions of the Income Tax Act on whether you will have to pay income tax if the cash or property received as a gift is credited in your name.

1. If the amount received as a gift is up to Rs. 50,000 / -, then you do not have to pay income tax on such gifts. The limit of Rs. 50,000 / – is the total amount received from one person in a financial year. For that, you need to keep a record of such gifts. Also, if the value of the property does not exceed Rs. 50,000 / – in respect of the property received as a gift, then no income tax is levied on such gifts.

2. If you are a personal taxpayer and your relative has given you a certain amount of money or property, you do not have to pay income tax on such gifts. However, the Definition of relatives is more important in Income Tax Act with relation to these provisions. Gifts received from relatives which are included in this definition are completely tax-free and there is no financial limit on such visits.

Definition of Relative
1. Self/ Spouse’s: Forefather-Foremother, Grandfather-Grandmother
2. Self/ Spouse’s: Father-Mother, Mother’s/Father’s Brother & his spouse, Mother’s/Father’s Sister & his spouse,
3. Self/ Spouse’s: Brother & his spouse, Sister & his spouse
4. Son & his wife, Daughter & her husband
5. Grand Son & his Wife, Grand Daughter & her husband

3. If you receive some money or property as a gift during your own wedding ceremony, such gifts are completely tax-free. Here, there is no provision for any ceremony other than the individual taxpayer’s own wedding ceremony. Also, gifts received at a wedding are not necessarily from relatives. But, you need to keep a detailed record of the gifts received and the giver.

4. If you are getting some amount/property as a gift as per will or inheritance claim, such gift items are also tax-free. But if you get some income from such inherited real estate property or other property or cash, then that income is not tax-free, you will have to pay tax on it.
Understand these provisions of the Income Tax Act regarding gifts and accept gifts accordingly.