According to income tax rules, if the value of gifts received from all sources exceeds ₹50,000, they are considered income to the recipient. They are then taxed according to that individual’s tax slab. However, there are some exceptions to this rule.
Income Tax: Many people don’t have a regular income. They rely on their sons and daughters for their monthly expenses. Harish Gupta of Ghaziabad also relies on his nephew for his monthly expenses. He says his nephew sends him around ₹60,000 every month, which covers his expenses. He wonders if he has to pay tax on this money. Moneycontrol asked this question to renowned tax expert and CA Balwant Jain.
Jain explained that according to income tax rules, if the value of gifts received from all sources exceeds ₹50,000, it is considered income for the person receiving the gifts. Tax is then levied on them according to that person’s tax slab. Regardless of the value of the gift, the person giving the gift has no tax liability. However, if the total value of the gifts does not exceed ₹50,000 in a financial year, no tax is levied on them.
He explained that there are some exceptions to this rule regarding tax on gifts. First, if a gift is received from a special relative, it is not taxable even if its value exceeds ₹50,000. Special relatives also include maternal uncles, maternal aunts, and paternal uncles. This means that a nephew will not be taxed on gifts received from his or her maternal uncles and aunts. However, if a nephew or niece gives gifts to their uncles and aunts that are valued at more than ₹50,000, they will be taxed. This means that if a nephew gives gifts worth more than ₹50,000 in a financial year, the uncle will be taxed on the gifts. This is because a nephew or niece is not included in the definition of special relatives.
Jain explained, “The total value of gifts received by Harish Gupta from his nephew exceeds the limit of Rs 50,000 in a financial year. Therefore, this will be considered as Gupta’s income, on which he will have to pay tax. However, since the total value of gifts received from his nephew in a financial year does not exceed Rs 12 lakh, he will not have to pay tax on it due to the rebate available under Section 87A in the new income tax regime.” This means that the money sent by his nephew to Gupta for monthly expenses will not be taxed.
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