Who doesn’t love receiving gifts, right? Whether it’s your birthday, your wedding day, or any festival, receiving a thoughtful present is always a great experience. But, here’s the catch – along with that shiny gift wrap, there can be some tax-related strings attached.
As per the IT Act, any gift in the form of cash, cheque, movable, or immovable property is taxable in the hands of the receiver.
Which gifts are taxable and who pays the tax?
Any sum of money or an immovable asset like a house or land received is a gift. Gifts also include movable assets like shares, jewellery, art pieces, and more. Any of these gifts received will be taxable if their monetary value exceeds ₹50,000. The gifts are taxable only in the hands of the receiver and not the sender.
What if you receive gifts from your spouse or parents?
When you receive gifts from relatives like parents, siblings, or spouse, it will not be taxed irrespective of the amount of gift received. A friend is not included in the definition of a relative You can read more on who all are relatives as per the IT Act, here.
Gift received on the occasion of marriage, death & inheritance is not charged to tax.
Let’s take a few situations with different types of gifts received and their taxation.
When you receive shares and securities as a gift
Gifting appreciating assets like shares and securities has become very common recently. When you receive shares as a gift, there are two transactions,
1. When you receive the shares(transfer of ownership),
If the monetary value (FMV) of shares & securities is more than INR 50,000, such gift is an IFOS income and taxed at slab rates. It’ll be exempt if received from a relative.
2. When you sell the shares,
Capital Gains tax would arise on the sale of shares. The holding period will be calculated from the date when the previous owner(sender of the gift) purchased the shares. In the case of equity shares, if the shares are held for more than 12 months, long-term capital gains will arise. If the shares are sold before 12 months, there will be short-term capital gains. Read more on how capital gains will be taxed, here!
When you receive gold as a gift
Gifting gold still remains an integral part of Indian culture. If you receive gold from non-relatives, it’ll be taxable. Same as in the case of shares, if the FMV is more than ₹50,000 then tax will be levied at a slab rate.
Later, when the gold is sold, the capital gains will be taxable. If the gold is held for less than 3 years, there will be short-term gains. If the gold is held for more than 3 years, there will be long-term gains.
In the case of immovable property like land, or property, as a gift, the taxation is similar to taxation on gold as a gift.
How to report such gifts in the ITR?
The gift received is reported under the head “Income From Other Sources”. If the gift received is not taxable, it will be reported under the exempt income head.
Read about more on Tax on Gifted Shares & Securities - Learn by Quicko
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