As per the Income-Tax law, a person is liable to pay tax when he receives a present valued above Rs 50,000. The net worth of such gift is combined with the total income and then taxed according to the individual slab. All the expensive gifts received from family and friends are taxable. Only the gifts received on wedding are non-taxable gift items. Again, if these gifts are sold, the earned income will attract tax.
It is important for professionals to take special care of gift items. It is compulsory for them to club the value of the gifts, with their income especially when the presents are a part of payment for their services.
Coming to interest income, there are many people who assume that interest earned on fixed deposits and savings accounts is non-taxable. They think that as banks have deducted tax at source for deposits, therefore they are not liable to pay tax on interest income. It is a myth as banks only cut TDS of 10% at source. The rest of the taxable amount has to be paid by the depositor.
Another area, where people commit a mistake, is non-disclosure of the second property. The property owner assumes that as the property is not rented, there is no need to pay any tax on it. However, they are unaware that even if the property is unoccupied, they still need to pay tax on notional income.
People should stay abreast, with the latest income tax regulations so that they don’t fall prey to black money unwittingly.