The Finance Bill 2017 has introduced an amendment to section 56 of the income Tax Act, from the next fiscal ,the money received as gift valuing more than Rs.50,000 will be chargeable to tax.

According to tax experts, a large number of companies reward or compensate their senior employees with non-cash gifts, which will now be taxed.

IT Department considers:

Money given in cash,cheque or drafts and reverse transaction.

Immovable property such as land or building or both

Movable property like shares, jewellery, drawings, paintings, or sculptures, gold bars as gifts.

The value of all the gifts received by a person during a year is fully exempt, as long as such gifts does not exceeds Rs.50,000 in a year. If the value of all gifts taken together exceeds Rs.50,000 then the aggregate of the gifts received become taxable without any threshold exemption. However , income tax laws also give a favourable treatment, to gifts between two close relatives. Any assets or money received as a gift, valued at Rs.50,000 or below in a year, are tax -free.

The List of Relatives:

Parents, Spouse, Siblings.Siblings of the Spouse, Lineal Ascendants,Descendants of the person and His or her spouse

No need not to pay any tax if the gift is given by close relatives. Gifts received by a couple for their marriage are completely exempt from gift tax. It doesn’t matter that the gift was given by someone who is not a close relative or friend. The estimated value of one or all gifts may exceed the Rs.50,000 clause mentioned above. But still not be charged to tax. For example , if your uncle gifts you a car on your wedding day, it will be exempt from tax. If your parents gift you a house for your wedding, then it will be tax free. Cash gifted by individuals to their spouse is exempt from gift tax ,but any income earned from this gift in the form of interest is clubbed with the gifter’s income and charged tax.

Similar rules apply for gifts to adult children (over the age of 18 years). For example , if aduld children are gifted fixed deposits by parents – the interest income is included in the adult child’s return.

When any sum of money or any property is received under a will or by way of inheritance, it is totally exempt from gift tax.

Its good to maintain a proper trail and documentation of a gift of high value. All you need to do is document of the transaction on a paper which clearly states that who transferred the money and the reason for it, along with the signatures of both parties. In future, if there is any income tax scrutiny, this small piece of proof will be clubbed with be handy and helpful. By understanding the gift tax rules and precautions to take, it will be safe.