Gifts received from ‘relatives’ are exempt from tax

NRI Problems

H.P. Ranina Q: My daughter is getting married in Ludhiana next month. As I have a large circle of relatives and friends, I may receive substantial gifts on that occasion. Would I be liable to pay tax in India on the gifts so received? A: Under section 56 of the Income-tax Act, gifts received from relatives on any occasion are exempt from tax. However, the word “relative” has been given a specific meaning which includes brother and sister, brother-in-law and sister-in-law, brother or sister of either parent, and your lineal ascendant or descendant. Spouse of such persons is also included. Any amount of gift received from them is exempt.

However, if gifts are received from persons who do not fall within the aforesaid definition of “relative” and the aggregate of such amount exceeds ₹50,000, the entire amount is taxable as ‘income from other sources’. Such amount would be added to your other taxable income in India and tax would be calculated on the aggregate amount. If the amount is not shown in the tax return, it would be deemed to be concealment of income and penalty would be leviable.

However, gifts received by the person who is getting married would be exempt from tax without any limit, even where the gifts are received from non-relatives. Hence, your daughter who is getting married will not be liable to tax on the amount of gifts received by her. Q: Bitcoins are gaining tremendous value. My friends in India have invested in these assets. Is there likely to be any government crackdown or regulation?