Under current Income Tax regulations, gifts received during Diwali, whether from loved ones or employers, may lead to tax liability if their value exceeds certain thresholds
Read More:-Diwali bonus can be taxable in your hands: Know when it is taxed and when it is tax exempt
During Diwali, the tradition of exchanging gifts among family, friends, and colleagues comes to the forefront. While these gestures of goodwill can enhance the festive spirit, they may also carry unexpected tax implications. Under current Income Tax regulations, gifts received during Diwali, whether from loved ones or employers, may lead to a tax liability if their value exceeds certain thresholds. It’s important for recipients to be aware of these rules to avoid any surprises when filing taxes.
Understanding Gift Tax Regulations
According to Section 56(2)(x) of the Income Tax Act of 1961, taxpayers are required to pay tax on certain gifts received within a financial year. However, not every gift is taxable. Specifically, gifts totalling up to Rs 50,000 within the year are exempt from tax. This exemption applies not to individual gifts, but to the cumulative value of all gifts received throughout the financial year.
Read More: How to Save Tax: Follow these 6 easy tax-saving tips
Who Is Exempt from Tax?
Certain gifts are completely exempt from taxation. For instance, gifts received from close relatives – including spouses, siblings, and parents – are not subject to tax. Additionally, gifts that come from inheritances, wills, or those received from members of a Hindu Undivided Family (HUF) are also tax-free. Furthermore, gifts from charitable organisations, educational institutions, and governmental bodies are exempt from taxation.
Corporate Gifts and Bonuses
For salaried individuals, the situation is slightly different when it comes to gifts from employers. Gifts valued at Rs 5,000 or less within a financial year are tax-exempt. However, any amount exceeding this threshold will be treated as taxable income, and recipients will need to account for this in their income tax returns.
As the festive season brings joy and generousity, it’s essential to be mindful of the potential tax implications of Diwali gifts. Being informed about these regulations can help you celebrate the festival without any financial surprises. If you anticipate receiving gifts or bonuses this Diwali, consider consulting a tax professional to understand how these may impact your overall tax obligations.
