Gift smart to avoid tax

Anand Kalyanaraman


There's a tax liability on gifts you receive in excess of 50,000. Knoing the rules
hel!s you avoid this
"lanning to !ro!ose on bended #nee and sli! a big, shiny solitaire on to your lady
love$s ring %nger& 'ice. (ut e suggest you !reserve the diamond for the edding
or later. )f the lady as#s hy, don$t miss the o!!ortunity to ma#e an im!ression.
*oo# into her eyes dee!ly and re!ly softly that it$s +ust to hel! her save tax,
-igh.value gifts in cash or #ind have tax im!lications. )f the total value of gifts you
receive in a year exceeds 50,000, you have to declare it as /income from other
sources$ and !ay tax on the entire sum.
0edding gifts exem!t
(ut the taxman, considerate soul that he is, has !rovided many exce!tions to the
rule. The big one is that gifts you receive for your edding are out of bounds. )t
doesn$t matter hether you get the gift from a relative or someone unrelated1 it
also doesn$t matter if the value of the gift exceeds 50,000. And it$s not that gifts
received only on the edding date are exem!t, even those you get in the run.u! to
the function or a fe days after don$t attract tax. 2o it$s best to time big.tic#et gifts
for the edding season. 2aving the !recious stone for occasions after your edding
also ma#es sense. This is because gifts given by relatives are alays exem!t.
2o if you charm your girlfriend ith a costly solitaire, it attracts tax, but if you do the
same for your ife, she doesn$t have to !ay tax.
The s!ouse is not the only relative. The taxman is liberal and !rovides sco!e large
enough to include an extended family as huge as the one in -um Aa!#e -ain Kaun.
"arents, grand!arents, brothers and sisters, children and grand.children are all
relatives. 2o are the !arents, brothers and sisters of your s!ouse and the brothers
and sisters of your !arents. (esides, the s!ouses of all the above !ersons are
considered relatives. Gifts from the above !ersons are exem!t from tax. That said,
it$s advisable to have the !a!eror# in !lace, +ust in case the taxman comes
#noc#ing later. A document hich mentions the details of the gift and is signed by
the giver and the receiver is a good idea.
A ide net
There are other exce!tions too. 3or instance, if you inherit gifts or receive them
through a ill, you don$t have to !ay tax.
(esides, gifts received from a!!roved funds, hos!itals, trusts or institutions are
exem!t from tax.
Also, hen it comes to gifts in #ind, not everything you get is taxable.
3or instance, if friends or business associates 4ood your house ith chocolates and
seets on 5hristmas, 6id or 7iali, relax 8 you don$t have to !ay anything to the
government.
9aluation
(ut you ill have to shell out tax if someone ho$s not a /relative$ gifts you land,
building, shares, other %nancial securities, +eellery, draings, !aintings or any
or#s of art, scul!tures and archaeological collections. 2o if on your golden edding
anniversary, your childhood friend gifts you an ex:uisitely chiselled 5hola bron;e
re!lica costing more than 50 grand, be !olite and say than#s, but get ready to !ay
tax.
<oveable !ro!erties such as +eellery or stoc#s are valued on the basis of their
mar#et rate, hile the government.determined stam! duty value is the relevant
yardstic# for immovable !ro!erties such as land and building.
'ote that a gift doesn$t have to be something given free. 2o if you get something
for less than its value, that$s also considered a gift for tax !ur!oses.
)n such cases, if the di=erence beteen the actual value of the gift and hat you
!ay is more than 50,000, you ill have to !ay the government its due.
The trouble is that individual gifts you get may be valued at less than 50,000, but
!ut together, if all that you receive during the year exceeds this threshold, you have
to !ay tax on the hole sum. 2o, if you get >5,000 in cash from A and a !ainting
valued at ?0,000 from (, you have to !ay tax on 55,000. 'ot fair, you say& (ut
such is life.
3inally, remember that you could get clubbed by the taxman. 2ure, your ife or
daughter.in.la don$t have to !ay tax on gifts you give them, but if they derive any
income from such gifts @for instance, rent on a gifted a!artmentA, such income ill
be treated as your on and is liable to taxation.
@This article as !ublished on A!ril >0, >0BCA
"rintable version D A!r >E, >0BC CF>CF?5 "< D
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