Diwali gifts from relatives are taxable or not?

As Diwali is around the corner, we give gifts to each other. You may be wondering what types of presents may be taxed. There are some kinds of gifts which are taxed and which are not.

Experts said that under the Income Tax Act (ITA), Diwali gifts received from relatives are fully exempted. However, any gifts received in excess of Rs. 50,000 from a person other than a relative are taxable under the heading ‘Income from other sources‘.

The term “relative” of an individual in taxation terms includes the following:

1. the individual’s spouse;

2. the individual’s brother or sister;

3. the individual’s spouse’s brother or sister;

4. brother or sister of either of the individual’s parents;

5. any individual’s lineal ascendant or descendant;

6. any lineal descendant or ascendant of the individual’s spouse;

7. the spouse of the individual mentioned in items (2) to (6).

Furthermore, presents received on some special occasions are tax-free.

Examples of such special occasions include:

1. Wedding

2. According to a Will

3. By way of inheritance or in contemplation of the payer‘s death

4. Gift received from the local administration

5. Gift received from any educational institution under Section 10 (23)

6. Gift received from the charitable organisation

“Hence, gifts received from a non-relative on Diwali other than those mentioned above, with an amount worth than Rs. 50,000, shall be subject to taxation.

The receipt of the following assets is subject to gift taxation:

1. Shares and securities

2. Jewellery

3. Archaeological collections

4. Drawings

5. Paintings

6. Sculptures

7. Any work of art

8. Bullion

In other words, gifts of assets other than those mentioned above would not be taxed even if they exceeded Rs. 50,000. However, receipt of monetary consideration in excess of Rs. 50,000 or immovable property in excess of Rs. 50,000 is subject to taxation.