Income Tax: Are your Diwali gifts and bonuses taxable?

According to Income tax Guidelines, from the point of view of taxation, gifts are classified as — any amount of money received (monetary Gift, specified movable assets (gift of movable property); specified movable assets received at a low cost (ie for insufficient consideration); immovable assets received without consideration (gift of immovable property); and acquired real estate at a lower cost.

are subject to monetary gifts taxesHowever, a certain limit of exemption is provided in a financial year.

In addition, monetary gifts received by an individual will not be taxed, such as money received from relatives, who can be a spouse, brother, sister or parent.

In case of HUF, monetary gifts are not taxable — money received on the occasion of marriage of the individual; amount received as inheritance; amount received in consideration of the death of the donor or the donor; amount received from the local authority; amount received from any fund, foundation, university, medical institution, other; Money received as a result of the demerger or amalgamation of a company among others.

Let us understand if your Diwali gift is taxable

Archit Gupta, Founder and CEO Clear said, “The Diwali season brings light, lots of gifts and happiness. But these gifts can be overwhelming. Here are the gifts received from friends, relatives and employers during this time. There will be tax on this festive season.”

On gifts from employers, Gupta said, “Gifts or vouchers received in a financial year will be tax-free if their aggregate amount is less than 5,000 Any gift you receive 5,000 will be added to your income and taxed as per your tax bracket. For example, if you find gifts around 5000 more during Diwali 3,000 again on Christmas, you have to pay tax on the value of the gifts 3000, which is more than Rs. 5,000

“Some employers give Diwali bonus in lieu of gifts. It will be considered as a part of their salary and will be taxed,” Gupta said.

Similarly, Nidhi Manchanda CFO at Fintu said, “Diwali bonus received from employer is treated as income from salary and is fully taxable.”

With regard to gifts received from friends and family, the Clear Founder highlighted that gifts from family members are not subject to tax. Family members are clearly mentioned in Income Tax:

the wife of everyone covered above

A friend or person not listed here is not considered a family member. Thus, gifts from them would be subject to tax.

If the aggregate value of gifts received during the year, whether in cash or in kind, exceeds Rs. 50,000, they are subject to tax under section 56(2) of the Income Tax Act. According to this section, a gift of up to Rs. 50,000 are tax-exempt; However, if this limit is breached, the entire gift value will be taxable.

immovable property received as a gift

Land or building received as gift during the year shall be taxed if the stamp duty value thereof exceeds 50,000 stamp duty value will be taxed.

While Fintu CFO explained, any Diwali gift that you receive from your family members such as spouse, parents, grandparents and siblings is exempt from tax, irrespective of the amount or value of the gift. But it is important to note that any income generated by investing this gift amount will be taxable as per the tax rules applicable to that investment.

Manchanda further mentioned that if the gift is from friends or distant relatives then such gifts are tax-free only if the amount is equal to or less than Rs.50,000. If the gift exceeds 50,000/- then the entire amount of the gift will be taxed. Also, one must know that this 50,000 limit is the total limit of all gifts received in a financial year and not just Diwali gifts. If the total amount of gift exceeds 50,000/- then the entire amount is taxable.

Manchanda said, “Taxpayers should be aware that gifts are taxed as per their income tax slab. Hence, if a person is in the 30% tax bracket then these gifts will be taxed at 30%.”

The festival of Diwali will start from Dhanteras on 22nd October and will continue till 26th October. The biggest day Lakshmi Puja will be on October 24.