Diwali 2019: No escape! You have to pay tax on gifts; check full list here

Here, you will be informed about the mathematics of tax on gifts, and what is actually a gift - cash gift; immovable property - land or house, and movable property - shares, jewelery, paintings, idols and more.

Prior to 1998, those who gave gifts (donor) had to pay 30% tax under Gift Tax Act. Representational Image, source: Pixabay

We have common practice of taking and giving gifts on occasions like weddings, birthdays, anniversaries or festivals. We also give and take gifts for our relatives or dear ones on other occasions. With Diwali almost on us, know whether the taxman can have a role in what you are going to gift away! Yes, gift transactions can also be taxed. On the Zee Business' Money Guru programme, tax expert Sunil Garg reveals the details. Here, you will be informed about the mathematics of tax on gifts, and what is actually a gift - cash gift; immovable property - land or house, and movable property - shares, jewelery, paintings, idols and more.

According to Garg, prior to 1998, those who gave gifts (donor) had to pay 30% tax under Gift Tax Act, but when Yashwant Sinha became Union Finance Minister he ended this Act in 1998. Later in year 2004, certain provisions were introduced under which, all the gifts taken by blood relations were exempt under Section 56, but it was taxable if conditions given in the section were violated. Check full list below of things and relations thereof when gift tax is applicable and when not:

Gifts can't be taxed in these relationships

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-Husband or wife
-Brother or sister
-Spouse's brother or sister
-Mother/ father's brother or sister
-Gift from grandparents
-Son or daughter
-Brother/ Sister's spouse

These gifts are tax free

-Gift on wedding
-Gift from relative
-Gift by will or inheritance
-Gift received from local administration
-Gift received from any educational institution under section 10 (23)
-Gift received from charitable organization

What are the Gift rules

-Gift received from relatives is outside the purview of tax
-No tax on gift from parents at wedding, festival
-Gift less than Rs 50,000 value in a year not taxable
-Gifts above Rs 50,000 value will be considered as share of your income
-Tax will have to be paid on cash received over Rs 50,000
-Rules are different if you take cash gift over Rs 2 lakh
-You have to pay penalty under Section 269 ST on cash above Rs 2 lakh

Gift taxable from parents?

-Gift tax free in blood relation
-No tax on gifts received from parents, siblings
-Gift will tax free even if it is more than Rs 50,000

Tax rules on exchange of gifts between husband and wife

-No tax on gift transactions between husband and wife
-Under Section 64, Income from Gift is taxable
-Income from gift transactions between husband and wife will come under income clubbing

Why gift deeds are necessary

-Gift deed on movable property is not necessary
-Deed must be made in real estate transaction
-Deed should be made before giving the gift
-A gift deed is a document
-Gift deed is used at the time of transaction of a gift
-There is no dispute over the ownership of the gift received from Deed
-Get help from a lawyer or expert to make a gift deed
-The deed must contain the name of doner as well as donee

When property is taxable

-Property received in a Will is not a gift
-Gift tax rules do not apply to property received through Will
-No tax on property received through Will of relative or anyone else
-But you have to pay capital gains tax on selling that property

Tax on gifts received in wedding

-Wedding gifts are completely tax free
-But gift received from employer is taxable
-Expensive gifts like car or watch is beyond the purview of tax
-Jewellery does not come under the gift tax net
-It is necessary for the jewelery gifter to tell his/her source of income

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Gift to foreign trust

-Gift to foreign friend will come under tax net
-Foreign friend or trust will have to deposit TDS on the gift
-No tax on taking gifts up to Rs 50,000 from abroad
-If the same gift is received on marriage in India, then tax free

(NOTE: Zee Business brings to you an exclusive line up of programming for Diwali 2019 with experts, insights & sharp acumen under Zee Business Damdar Diwali show. A Diwali treat for you! Starting soon from October 14 only on Zee Business.in)

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