Are gifts received during weddings taxable?

“I don’t think so. No one will gift through Crossed Account Payee cheque or RTGS or NEFT transfers. Whatever gift is received (which comes mostly in cash) during the wedding is spent towards wedding expenses or to buy some valuables for the new home” If you ask anyone about wedding gifts, you may get this as the answer.

So, where is the question of paying taxes on wedding gifts? That’s right. There is no tax on gifts received during weddings.

Does this logic apply to other ceremonies such as wedding anniversary, birthday (of politicians, especially), engagements, thread wearing ceremony, etc.? No. The exemption is limited to marriage and any gifts received during other ceremonies are taxable!

That means suppose on the wedding anniversary, father-in-law gifts Rs.2 Lakhs, is it taxable? No. Any gift received (without any higher limit) from a relative on any occasion or otherwise is exempt from tax.

Who is a relative? The Income Tax Act has prescribed a list of relatives and if you get gift from any of these people, then it is exempt from tax. Relative means –

1. Spouse of the Individual (husband or wife) – Example – Mr. Ramesh who has received a gift from his wife is exempted from paying tax. (clubbing provisions of Income tax act is applicable on the income from gift. Read: Clubbing provision in case of gift amount invested in the name of wife.

2. Brother or sister of the individual  – Example – Mr. Ramesh’s brother or sister. 

3. Brother or sister of the spouse of the individual– Example – Mr. Ramesh’s wife’s brother or sister. 

4. Brother or sister of either of the parents of the individual – Example – Mr. Ramesh’s uncle (mother brother/sister or father’s brother/sister) 

5. Any lineal ascendant or descendant of the individual – Example – Mr. Ramesh’s  father, mother, grandfather/mother, great grandparents. 

6. Any lineal descendant of the Individual – Example – Mr. Ramesh’s son/daughter, grandson/daughter. 

7. Any lineal ascendant or descendant of the spouse of the individual – Example – Mr. Ramesh’s wife’s father, mother, grandfather/mother, great grandparents. 

8. Spouse of the persons from 2 to 7 Example – Mr. Ramesh’s brother’s wife or sister’s husband etc.

So, the summary is –

• that the gift received during the year from relatives is exempt from tax (without any limit) 

• that the gift received during the occasion of marriage from anybody is also exempt from tax (without any limit)

Are any other gifts exempted?

Yes. The total gift amount received during the year upto Rs.50,000 from non-relatives is also exempt. For example: Mr. Ramesh receives Rs.30,000 from his friend Murthy and Rs.20,000 from Punith during the year; both are exempt from tax. Suppose, he gets another  Rs.10,000 from Dinesh, then the entire amount of Rs.60000 is taxable!

There are some more aspects about gift taxes in India. Instead of writing everything here and confusing you, I will write another article to cover the remaining aspects.

 
Thought for the day

The best gifts come from the heart, not from store. This gift is not taxable even if it comes from non-relatives!

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