Income Tax Department imposes tax on these gifts received at the wedding, know what the law says
Marriage Gift Tax: Are gifts worth lakhs received at a wedding completely tax-free? Many people are confused about this, but the income tax rules say something else. Know which gifts may attract tax and which may not.
Marriage Gift Tax: In India, marriage is not just a social ritual, but an important occasion filled with gifts and expenses. In such a situation, the question often arises whether income tax has to be paid on the gifts received on the occasion of marriage? The answer is – yes and no. It actually depends on who received the gift, when and from whom.
There is a provision of tax on gifts under section 56 (2) (x) of the Income Tax Act, 1961. However, some special exemptions have been given on the occasion of marriage, but not in all situations.
What are the tax rules on gifts received at a wedding?
Under the Income Tax Act of India, gifts worth more than ₹50,000 in cash, property or any other form are generally taxable to a person in a financial year. But this rule does not apply to gifts received on the occasion of marriage.
Which gifts are exempted?
- Gifts received by the bride or groom are not taxable, whether the giver is a relative or a non-relative.
- This exemption is limited only to the occasion of marriage, gifts received before or after that will be taxable.
- This provision is applicable only for the bride and groom, not for other family members.
For example, if a friend gives a gift of ₹5 lakh to the groom on the wedding day, it will be tax-free. But if the same friend gives a gift of ₹1 lakh to the groom’s father, it can be considered taxable.
Which gifts are taxable?
If a person receives a gift of more than ₹50,000 other than on the occasion of marriage and that person is not a close relative, then he may have to pay tax as gift income. The definition of relatives includes parents, siblings, grandparents, in-laws, husband-wife, son-daughter and their spouses.
According to CA Abhishek Soni, valuable gifts like stocks, jewelry, land, house or car are also included in the tax exemption, provided they are received by the bride or groom on the occasion of marriage.
Details have to be given in ITR
Even though the gift received by the bride and groom at the wedding does not come under the purview of tax, tax experts still advise that details of gifts of large value be given in the Income Tax Return (ITR). This helps in calculating capital gains tax when selling the property in future.
Why is caution necessary?
The Income Tax Department has been vigilant about monitoring gift income for the last few years. Showing unaccounted cash or property in the name of tax-free gifts can come under the category of tax evasion. According to CA Abhishek Soni, not giving information about taxable gifts in your ITR can lead to a penalty. This can be up to three times the amount of the gift.
Therefore, all gifts above Rs 50,000 in a financial year should be disclosed, which are taxable under Section 56 (ii) of the Income Tax Act. It would be wise to keep a proper record of all gifts and consult a tax expert when needed.
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