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The sample examples I have provided below have become common in our regular life. Hence we need to be little careful in knowing what are the rules and regulations of Gift tax in India. Have you asked your friend to transfer Rs 60,000 to your bank account and have you settled offline through cash? Be careful, as income tax department may scrutinize and ask to pay income tax on the amounts received from your friend in your bank account. You should know the ground rules of Gift tax in India on how to deal them to prove that such transaction is already settled. Hence it is important to know about gift tax in India and its rules and exemptions.
3) Gift given on wedding is not taxable Gift received during wedding from anyone is not taxable. 4) No tax on gift received either through WILL or inheritance If you have received any amount by way of gift through WILL or inheritance, it would not be taxable under gift tax. Frequently asked questions on Gift tax in India 1) Gift received by minor children or spouse is taxable? Any gift received by minor child or gift received by spouse, the same IT rules would apply. If they are exempted with any of the points indicated above, it would be treated as exemption from gift tax, else the amount would be clubbed with your income and necessary income tax as per your income tax slab needs to be paid. This is as per clubbing rules of income tax. 2) During emergency I requested my friend to transfer Rs 60,000 to my bank account, will it attract gift tax? If you have taken loan from your friend and you have a proof that you have returned that money through your bank account, you need not worry. But if you have paid offline through cash, it is better to document and take necessary signatures from your friend so that in case of any IT scrutiny, these documents would be handful. If you cannot prove, IT dept has every right to include this as taxable income and you need to pay tax. Also if you have taken the amount as loan and not repaid within same financial year through your bank account, it is better to have a document that you have taken loan so that you can prove this to IT dept. 3) I have made a FD in my spouse or child name, will it attract gift tax? Since this falls under Relative category, no gift tax is payable. However, since your spouse or child do not have income, the interest on such bank FD needs to be added to your income and necessary tax needs to be paid. This is as per clubbing provisions. 4) I have received gift from non relatives for Rs 51,000, do I need to pay tax on Rs 1,000 (Rs 51,000 minus Rs 50,000 exemption)? No. Once the amount crosses Rs 50,000, you need pay tax on total amount of Rs 51,000 and not incremental amount. 5) I have gifted the property to my wife and she sold after few years. Since she falls under Relative, she is not supposed to pay gift tax and even exempted from long term capital gain. Am I right? From gift tax point of view, yes, she is falling under relative category, no gift tax is applicable. However, when she sold the property, any profits made would be clubbed with your income and necessary long term capital gain tax needs to be paid.
*Contributed by S. Parashar