CHENNAI: When your family deposits some money to your bank account because you want to pay the down payment of your house, have you ever thought if you have to pay tax on that amount or not?
Experts including Archit Gupta, Founder & CEO ClearTax.com, in an interaction, told Express that in these kinds of transactions, when money comes and goes out of your bank account, it is very important for one to understand the income tax rules on gifts in order to benefit from gift tax and save more by gifting money to your family members.
Which gifts are tax free and considered part of income?
The first major rule which every person should know is that there is no tax to be paid on gifts received (cash or kind). If your family members like parents, siblings, spouse, in-laws gifts you a cheque, it is tax-free. There is no limit to this. This means you can receive as many gifts as you want from family members without having to worry about paying tax on them.
However, gifts received from non-family persons are tax-free till the aggregate amount of gifts reaches a value of Rs 50,000 in a financial year. Once the amount crosses Rs 50,000, the entire value of gifts received will be added to the receiver’s income. For example, if you receive Rs 35,000 from a friend, and Rs 14,000 from a colleague the aggregate value of the gifts will be Rs 49,000 and will not attract any tax. But if another friend, Lalita, gives you a gift of Rs 2,000 in the same financial year, then the collective value of gifts received by you will become Rs 51,000, which means that the entire amount of Rs 51,000 will be taxed as per your income tax slab rate.
How to benefit legally from gift tax exemptions?
To legally benefit from gift tax exemptions, the receiver can make sure that gifts received from non-family persons do not exceed Rs 50,000 in a financial year. For example, if you’ve received gifts worth Rs 50,000 by March in a financial year, you can ask a payer to give you a gift in April, once the new financial year starts. This way, the gifts received will not legally attract tax.
Are bonus shares received by a shareholder liable for tax?
Gains made from bonus shares are liable for tax when they’re sold within a year. Short-term capital gains tax will be applicable when the bonus shares are sold within one year.
Hence, to avoid paying tax on gains made from the sale of bonus shares, the shareholder should hold the shares for at least one year. This way gains can become tax-free.