Gift Tax-: Beware of receiving Money !!!

Any gift received from or given to non relatives above ` 50,000 is taxable. If you receive more than ` 50,000 during a financial year without any consideration, then, the entire sum is taxable. Below mentioned points are some exceptions to the case:

• On the occasion of marriage

• Under a will or by way of inheritance

• Gift from a relative

• In contemplation of death The limit of ` 50,000 is for the entire financial year (Apr 1, 2010 to Mar 31, 2011), irrespective of the number of people from whom you have received the money. For example if you received Rs. 10,000 from six persons, you will have to pay tax on the entire sum of ` 60,000. Also a gift received in kind, such as property, paintings, bonds, debentures and jewellery without consideration is also taxable. If you are gifted a painting worth ` 2 lakh, it will be included in your income and taxed as per your slabs. However if a property is received on consideration which is less than stamp duty value, then it will not be included in your income.

When you receive from your relatives

You can receive any amount or property from your relatives without paying income tax as presently, there is no gift-tax. The term “relative” includes:

• Spouse

• Brother or sister

• Brother or sister of the spouse

• Brother or sister of either of the parents of the individual

• Any lineal ascendant or descendent

• Any lineal ascendant or descendent of the spouse

• Spouse of the person referred to in (2) to (6)

A lineal descendant is a person who is in direct line to an ancestor: child, grandchild, great-grandchild and so on. Similarly, a lineal ascendant could be parent, grandparent, great-grandparent and so on. Hence gift from father, mother, brother, sister, father in law, mother in law, brother in law, sister in law, etc. will not attract any income tax. Similarly grand parents can give tax free gifts. Avoid gifts from mother’s father/mother (Nana/Nani) as these are not tax free. There are debates on treating them as lineal descendent. If you gift money or an asset to your daughterin- law, then the income from that money or asset will be clubbed in your income.

Source-: taxplanner