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Will you be taxed if you get Diwali gifts?


The gifting season is here, with not just friends and relatives exchanging a variety of gifts on Diwali, but employers too offering their employees bonus and other gifts to celebrate the occasion. Are all such gifts taxable in the hands of recipients or is there a threshold limit above which one needs to pay tax? Can just anyone offer tax-free gifts or only select people fall into this category? The taxation of gifts, be it money or property, whether it is during Diwali or for any other occasion, recieved by an individual or an HUF, falls under the ambit of Section 56(2)(x) of the Income Tax Act, under the head ‘income from other sources.

1 .Gift categories

As far as taxation is concerned, a gift can be classified as follows:

  • Any sum of money received without consideration, that is, when it’s not payment or remuneration or a legally binding exchange.
  • Specified movable properties received without consideration.
  • Specified movable properties received at a reduced price.
  • Immovable properties received without consideration.
  • Immovable properties acquired at a reduced price.

Here, we shall only consider money and movable properties as gifts during the festive occasion.

2.Taxation of gift money

If the aggregate value of the monetary gifts received during the financial year exceeds Rs.50,000, it will be taxed. It will not be taxed only if it is received from a relative, where a relative is specified as spouse, brother or sister of the individual or his spouse, brother or sister of either of the parents, any lineal ascendant or descendent of the individual or his spouse, or spouses of those mentioned above. Since friends are not ‘relatives’ as per the above definition, the gifts received from them will be taxable, if the other criteria of taxing gifts are satisfied. Monetary gifts are also not taxable if received during marriage, as inhertiance, etc, but we shall

3.Taxation of movable property as gift

The prescribed movable property means shares/securities, jewellery, archaeological collections, drawings, paintings, sculptures or any work of art and bullion, being capital asset of the taxpayer, and Virtual Digital Assets (crypto assets and non-fungible tokens or NFT) as well. If such property is received without consideration and its aggregate fair market value during a financial year exceeds Rs.50,000, it will be taxed. As in case of money, such property received from specified relatives will not be taxed. If the value of property is less than the fair market value, then it will be taxed if the difference between the aggregate FMV and consideration does not exceed Rs.50,000. If it exceeds this amount, then the entire difference is taxable, not just the difference that exceeds Rs.50,000.

4.Gifts from employer

Any gifts, vouchers, or bonus that you receive from your employer during festive occasions such as Diwali, Christmas, etc, will not be taxed if the aggregate amount of these gifts during a financial year does not exceed Rs.5,000. If the amount exceeds this threshold value of Rs.5,000, the gifts will be taxed under the head ‘income from salary’ as per your tax bracket.

IF YOU HAVE A WEALTH WHINE, WRITE TO US

All of us have been in a financial dilemma when it comes to relationships. How do you say no to a friend who wants you to invest in his new business venture? Should you take a loan from your married brother? Are you concerned about your wife’s impulse buying? If you have any such concerns that are hard to resolve, write in to us at etwealth@timesgroup.com with ‘Wealth Whines’ as the subject.

Disclaimer: The advice in this column is not from a licensed healthcare professional and should not be construed as psychological counselling, therapy or medical advice. ET Wealth and the writer will not be responsible for the outcome of the suggestions made in the column.



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