Tax treatment of gifts received by an individual or HUF & tax implication of gift by Resident to non-resident
-Taxability of gifts lets understand with practical examples: -Gifts can be classified as monetary and non-monetary gifts (example movable and immovable property) in current post we have covered monetary gifts.
-Monetary gift received in cash, cheque, draft, is taxable if money received during the year exceeds Rs.50,000.
-Exemption to the above rule, that is monetary gift received by an individual or HUF will not be charged to tax in below conditions)
If the money is received from relatives (list of relatives mentioned in the note below).
Money received on the occasion of the marriage of the individual.
Money received under will/ by way of inheritance.
Money received in contemplation of death of the payer or donor.
Note:Â Hence monetary gift received from friends or other than relatives are taxable.
Few more important queries taxpayer may have:
1) Is there any exception to the rule were monetary gifts received from friends are not taxable?
Answer:
- Gift received on the occasion of marriage of the individual is not charged to tax.
-Â Apart from marriage there is no other occasion when monetary gift received by an individual is not charged to tax.
-Â Hence, monetary gift received on occasions like birthday, anniversary, etc. will be charged to tax.
2) Monetary gifts received from abroad?
Answer:
If the aggregate value of monetary gift received during the year by an individual or HUF exceeds Rs. 50,000 and the gifts are not covered under the exceptions discussed in earlier part, then gifts whether received from India or abroad will be charged to tax.
Note: hence monetary gift received in aggregate exceeding Rs. 50,000 in a year either from India or abroad is taxable
Illustration 1:
Mr. Kumar received following gifts during the financial year 2022-23:Â
Rs. 1,84,000 from his friend residing in Canada.          Â
Rs. 25,200 from his elder brother residing in Delhi.          Â
Rs. 84,000 from his friend residing in Delhi (received on the occasion of birthday of Mr. Kumar).
What will be the tax treatment of above items in the hands of Mr. Kumar?**Considering provisions, the tax treatment of gifts in the hands of Mr. Kumar will be as follows:
Rs. 1,84,000 received from his friend will be fully taxed because friend is not covered in the definition of ‘relative’.
Rs. 25,200 received from elder brother will not be charged to tax because elder brother is covered in the definition of ‘relative’.
Birthday is not covered in the list of prescribed occasion on which gift is not charged to tax, hence Rs.84,000 received on the occasion of birthday will be fully taxed.
Tax planning & List of relatives, covered in comments section, due to character limit for each post.
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