Tax on gifts is a complex subject. It depends on many things. These gifts can be anything. For example, life insurance policy, shares, or property. Tax on gifts depends on their value. What is the relationship of the one who gives it to the one who takes it? Income tax rules clearly state how gifts will come under the ambit of tax and which will be exempted. Let us understand this aspect here.

What does gift tax have to do with relationships?

The relationship is very important in a gift tax. There is no tax on gifts received from relatives. At the same time, tax may be imposed on gifts received from friends or acquaintances. Gifts received from spouse, parents, children, siblings, son-in-law, daughter-in-law, grandchildren, grandparents are tax-free. Gifts received from nephew-niece, uncle-aunt, and maternal uncle-aunt are also tax-free. Apart from this, gifts received on the occasion of marriage are tax-free. No matter what their amount is. Gifts up to Rs 50,000 in a financial year from any individual are tax-free. Even if he is not a relative. Gifts up to Rs 50,000 are tax-free. At the same time, gifts more than this may be taxable.

What do experts say?

Arnav Pandya, founder of Moneyeduschool, while explaining the income tax rules for gifts, says that many things are important in this. When a gift is received from one person to another, it is taxed in the hands of the recipient subject to certain conditions. This is the first thing. Secondly, the value of the gift is also very important. It has been capped at Rs 50,000 per year. In such a situation, if the value is less than Rs 50,000 then no income will be considered taxable. Whereas gifts worth more than Rs 50,000 are taxable. Third, if a gift is received from a relative, it satisfies one of the conditions that make the amount exempt from tax. Therefore, any amount received from a relative, even if it exceeds Rs 50,000, will not be taxable in the hands of the recipient.

According to Arnav, the definition under Section 56 is very clear in terms of who is a relative. For example, for a person, his spouse will be considered a relative. Similarly, his brothers and their sisters along with their spouses, brother and brother's wife, and sister and sister's husband will also be considered relatives.

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