Diwali has finally come, and thus is the time to exchange gifts. Though small gifts such as sweets or any other small item may be immaterial from the point of view of taxation, there are tax implications for those gifts that cross a certain ceiling.
Here is the list of gifts that might attract taxes.
1. Diwali bonus or a gift - Any gift from an employer to an employee is taxable in the hands of the employee. For example, if Diwali bonus is paid to an employee then such an amount is taxed as per the tax slab of an employee. Only gifts of value up to Rs. 5,000, whether in cash or kind, are exempted.
2. Business gifts - If gifts are received as a result of business relations, then the same is taxable in the hands of the receiver. The value of such gifts should be added to the total taxable income and the tax be paid accordingly. Moreover, if the gift received is expensive, then a valuation certificate should be sought so that the exact tax can be calculated for such gifts.
3. Gifts from family and friends - A relieving fact is that gifts of an amount up to Rs. 50,000 from friends or non-relatives are not taxable. This means that if an individual has received a gift of up to Rs. 49,000 then the same is exempt from tax but if the total value reaches over Rs. 50,000 in a given financial year, then the tax is applicable on the whole of the amount.
Further, any gifts received from relatives such as a spouse, brother or sister of a spouse, brother or sister, brother or sister of either of the parents, any lineal descendant or ascendant of a person or spouse, is completely exempted from tax. For example, if a gift of Rs. 1,00,000 is received from an Aunt (Sister of the mother) then the same is not taxable in the hands of the recipient.