Here’s All You Must Know About Gift Tax & Tax On Donations, That Includes Gifts From A Spouse!

‘Tis the season to be jolly, but before you buy those gifts or consider giving to a charity, here’s what you should read about gift tax.

With Christmas and a brand new year a few days away- it seems as if the entire world has lapsed into its annual ritual of either reflecting on the year gone by with sobriety or partaking in festivities with aplomb.

Whether you are a homemaker making gajar ka halwa that your family will demolish while warming themselves around a fire, or a college student on a diet to fit into the cute blouse your bought for your sister’s engagement ceremony, this time of the year can give us a great chance to look at these little things that make our lives meaningful.

Such as the joy of giving and receiving gifts!

Initially, gift-giving around this time (such as exchanging presents around a christmas tree or sending cards on a mailing list) was a western idea. However, today with guests flocking to meet family, wedding season peaking, multi-cultural celebrations and corporate HRs rolling out Secret Santa activities – many of us have become both gift-givers and gift-receivers.

And, while purists may argue that kind gestures, a warm smile, genuine appreciation and lending a hand during tough times are the best gifts one can give, there are undoubtedly material objects that can convey an approximation of our regard for each other, in addition to intangible appreciation.

What we must keep in mind is that while festivals, gifts and the act of charity might be sparkly and heartwarming, there are still boring and tedious points we should keep in mind.

Such as the financial implications of giving or receiving either a gift or donation. In short, gift tax.

In this article, I breakdown both personal gifts to your loved ones as well as donations to worthy charities (I have listed a few I was able to vet, but feel free to comment your recommendations or look at Indian Government’s prescribed list).

First up Personal Gifts: The Joy of Giving (gift tax implications included)

Are the gifts you receive taxable for you as the recipient? Not always.

However, to not incur gift tax, it must meet certain criteria. As per income tax laws, non-taxable rules apply when gifts are from family members or relatives. Given that in India, we have massive networks of relatives, the law covers most immediate and extended familial bonds.

Image Source: TaxGuru

If you have ‘children’ who are NRIs and they give you cash, the same is exempt and so is the case when your friends (or distant relatives not included in the above list) give you a cash or equivalent gift of less than 50,000.

Similarly, gifts you receive on your wedding (especially those handy lifafas with loose cash) or by way of inheritance, or through a written will. are all exempt from gift tax. If you inherit a property (as most of us do in India) it is except from tax, however if you receive rent from this property, then you must show rental income as ‘income from other sources’ such as inherited property.

In a nutshell, you should only pay tax when you receive a gift or cash from a non-relative exceeding 50,000 rupees. 

If I receive a gift from my spouse, will it incur gift tax?

It is important to note that spouses too have to pay taxes on income arising from gifts!

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This article gives you all important tips on what tax you will need to pay on gift tax and how to save yourself this tax and will cover:

Gift tax on personal gifts you give or receive, including gifts from family.

Is inherited wealth considered a gift and does it incur gift tax?

Gift tax on donations and tax deductions you must know about.

Checking for credibility and tax rules at the charity or NGO or religious institution you donate to.

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