Income tax on gifts: Gifts received up to 50 thousand in a financial year are completely tax free.
If you get any kind of gift from your relative and its value is high, then a question arises in your mind that what are the tax rules regarding this. This gift can be cash or it can be expensive things as a gift. In this article, you will learn about the tax rules on gifts received from relatives. Together we will also know what is the definition of relative under the Income Tax Act.
The gift item has been included in section 56(2) of the Income Tax Act 1961. If you receive goods or cash value more than Rs 50,000 in a financial year as a gift, then it will be treated as income from other sources and it is taxable. Gifts received up to 50 thousand in a financial year are completely tax free. If a friend gives you something as a gift, then it will be included in the purview of 50 thousand. Gifts received from everyone in a financial year are included in the limit of 50 thousand.
Apart from this, the gift is also tax free in some other cases. The gift received at the time of marriage is tax free. If something is received as a gift due to a will, then that too is tax free. If a person dies and he gives something as a gift to someone before he dies, then it will be considered tax free. Also, the gift received from relative is also tax free.
Gift received from relative is definitely tax free, but a special definition of relative has been given in the Income Tax Act which is important to understand. Under the Act, the spouse i.e. husband and wife are considered relative. Apart from this, your siblings, husband and wife’s brother and sister, parents’ own siblings means uncle, aunt, maternal uncle and aunt are also considered relative. Apart from this, parents like parents, grandparents, maternal grandparents, son-daughter, grandchildren and wife’s parents, grandparents and maternal grandparents are also considered relative.
Apart from this, all the relatives mentioned above, their spouse i.e. husband and wife are also considered relative. For example, A is a man, for him the brother of the wife is considered relative. Along with this, his wife also comes in the realm of relative. Similarly if A is a woman then her husband’s sister will be relative. Along with her husband will also be considered relative. At the same time, in the Income Tax Act, nephew-niece, nephew-niece, brother-in-law and sister-in-law’s boy-girl or uncle’s boy and girl are not considered relative.