Gift tax - income tax

1.Gift Any sum of money (without Consideration) – 

if the aggregate amount of money received in any previous year is more than Rs 50,000, the entire amount received shall be taxable as income from other source

Gifts received from Relatives

As per the Income tax act, the sum of money received from any of your relatives are fully exempt from tax. Here the “relatives” term defines by the Income Tax act as follows :

• Spouse of the individual
• Brother or sister of the individual
• Brother or sister of the spouse of the individual
• Brother or sister of either of the parents of the individual
• Any lineal ascendant or descendant of the individual
• Any lineal ascendant or descendant of the spouse of the individual
• Spouse of the person referred to in clauses (ii) to (vi).
• In case of a Hindu undivided family, any member thereof;

For example if you are receiving sum of money of Rs.100000 from your uncle (your mother’s brother), it is fully exempt from the Tax. Whenever you get the gifts please apply the relations in the above list to ascertain whether you are liable to pay any tax for the received gift.

Gifts (sum of money) received From Non-Relatives

Here non-relatives means anyone who doesn’t come under the above mentioned relation for you. In this case you are tax exempt up to maximum of Rs.50000 for a financial year. If you receive the sum of money worth more than Rs.50000, you are liable to pay the tax on the aggregate amount (that is, total amount received). This rule applies when the gift is a sum of money, whether in cash, by way of cheque, bank draft or any articles which is value more than the Rs.50000.

For example when you are receiving a gift of Rs.1,00,000 (cheque) for the best performing in your company (not a bonus), Rs.1,00,000 shall be liable to  tax.