There are certain income tax gift rules that the government has imposed, which are also known as gift taxes. A gift tax is a tax charged on transferring property or money as a gift from one person to another. The gift tax is charged to the person who gives it instead of the beneficiary.
The government levies a tax on the transfer of assets made as gifts, known as gift tax. The giver is responsible for paying the gift tax, not the recipient. All donations, whether made as money, property, or other assets, are subject to the gift tax. The Income Tax Act of 1961 governs the gift tax in India.
From the perspective of taxation, gifts can be categorised as follows:
This refers to any money received as a gift without expecting anything in return.
This category includes specific movable items received as a gift without payment.
This category pertains to movable goods acquired at a discount or for insufficient compensation.
This category encompasses immovable property acquired without exchange, i.e., a property received as a gift.
This category refers to real estate purchased for less than its worth, i.e., below its stamp duty value.
The gift tax rate in India is determined by the value of the gift. Depending on the overall worth of the item being gifted, the gift tax ranges from 0% to 40%. The following table displays the gift tax rate according to the gift's value:
Certain gifts are exempted from gift tax as per the Income Tax Act of 1961. Here are a few examples of gift tax exemption:
Gifts from relatives, including parents, siblings, spouse’s parents, etc., are not obligated for gift tax.
Gifts given in celebration of marriage are free from gift tax. The gift might come from any individual and can be money, property, or anything else.
Gift tax is not applied to donations given to charity organisations. However, according to Section 80G of the Income Tax Act of 1961, the charitable organisation must be registered.
Gift tax is not applied to gifts received per a deceased person's will.
Employer gifts are excluded from gift tax if the present value is less than Rs. 5,000.
Lastly, understanding the various types of gifts for tax purposes is critical to reduce the taxable amount. However, focusing on managing personal expenses is also an important part of managing your financial health.
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The gift tax rate in India is determined by the value of the gift. Depending on the overall worth of the item being gifted, the gift tax ranges from 0% to 40%.
Up to a gift value of Rs. 50,000 can be given to someone without incurring any tax obligations. Under the Income Tax Act, gifts exceeding Rs. 50,000 are liable to gift tax. However, in particular circumstances, such as gifts from close relatives, some exceptions and exemptions might be applicable.
The giver, i.e. the person who is giving the gift, is responsible for paying gift tax in India.
The gift tax has not been eliminated in India as of May 2023. However, gift tax only applies to particular situations and quantities, such as gifts exceeding Rs. 50,000 in a fiscal year.