In India, weddings are grand affairs - full of tradition, family, love… and gifts. Whether it's cash in an envelope (shagun), jewellery, or even cars, the giving and receiving of gifts is deeply woven into our wedding customs.
But here's a twist most families never see coming:
If you're the parent receiving gifts during your child's wedding, those gifts could be TAXABLE!
Yes, you read that right. Those lakhs of rupees in shagun you received from friends and well-wishers? The Income Tax Department may treat it as your income unless you're the one getting married.
The Real-Life Case That Opened Everyone's Eyes
Meet Rajinder Mohan Lal from Chandigarh.
- In 2007-08, he received Rs 21 lakh in gifts from friends and relatives during his daughter's wedding.
- Rajinder didn't report it in his income tax return, believing, like many of us, that wedding gifts are tax-free.
- But the Income Tax Department taxed the entire Rs 21 lakh, and the Punjab & Haryana High Court agreed!
Why? Because Section 56(2)(vi) of the Income Tax Act says only gifts received on your own marriage are exempt.
So, since it was his daughter's marriage, Rajinder had to pay tax on the gifts.
What the Law Says - In Simple Terms
Under Section 56(2)(x) of the Income Tax Act:
Gifts are tax-free if they are:
- From relatives (as defined in the Act)
- Received on your marriage
- Received through inheritance or a will
Gifts are taxable if they are:
- From non-relatives and exceeding Rs 50,000
- Received on someone else's marriage (like your child's!)
- Not part of inheritance or marriage exemptions
How the Tax Works: An Example
Let's say Mr. Sharma hosts his son's wedding. A friend gifts him Rs 1 lakh in cash.
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Since Mr. Sharma is not the one getting married, and the gift is from a non-relative, it is fully taxable under "Income from Other Sources."
But if that same Rs 1 lakh was gifted to the groom, it would be 100% tax-free, because the groom is the individual getting married.
Hidden Tax Trap: Earnings from Gifts Are Also Taxable
Even if a gift is tax-exempt (say, a car gifted by a father to his daughter), any income earned from it is taxable.
Example:
- Daughter gets a car (gift) worth Rs 1 crore - Tax-Free.
- She rents it out and earns Rs 50,000/month. That rental income is taxable.
Parents, Here's Why You Should Care
Most Indian families focus only on the bride and groom when it comes to wedding expenses, but the gifts received by parents during the wedding can quietly become a tax liability.
If you:
- Host a wedding for your son/daughter
- Receive substantial cash or valuables from family friends
- Do not declare it in your income tax return
You may be in the same boat as Rajinder Mohan Lal.
What You Should Do (Checklist)
- Track all gifts received by you and your spouse during your child's wedding
- Identify the source - is it a relative (as per IT Act) or not?
- If from non-relatives and above Rs 50,000, declare it in your tax return
- If you're unsure, consult your CA before filing
Definition of Relative (for Tax Purposes)
Spouse, parents, siblings, lineal ascendants/descendants (children, grandchildren), spouse's parents, etc.
Your best friend, neighbour, or boss is not a "relative" under the tax law.
Same-Sex Couples & Unregistered Marriages: No Exemption (Yet)
Since Indian tax law ties exemptions to legally recognised marriages, couples in:
- Same-sex relationships
- Live-in relationships
- Unregistered social ceremonies
Do not qualify for marriage-related gift tax exemption - even if society accepts their union.
Final Word
Weddings bring joy, but also responsibilities - including tax responsibility.
So the next time you're attending or hosting a wedding, don't just think of outfits and menus. Think of your income tax return, too!
CAclubindia
