Tax Saving on Gifts

In India, there are numerous occasions to celebrate. Be it festivals, birthdays, or anniversaries, any celebration in India is incomplete without the exchange of gifts. Everyone here prefers exchanging gifts with their loved ones to make any occasion even more special. More than anything else, gifting is also an act to express love and gratitude towards their loved ones. In India, there is a set rule and taxes imposed when it comes to gifting, which is mentioned under the Gift Tax Act. So, in today’s blog let us understand all about tax savings on gifts.

What is the Gifts Tax Act?

The Gifts Tax Act or GTA was introduced by the government of India in 1958. This act was implemented with the objective to impose taxes on any individual who is gifting or receiving any gift. These gifts can be of varied types such as cash, jewellery, cheques, gold bonds, immovable properties, or anything else. However, later in the year 1998, the Gifts Tax Act was abolished to make all gifts tax-free. Later in 2004, the Gifts Tax Act was reintroduced, thus it is important to understand all about how tax is calculated on gifts. The Gifts Tax Act which was reintroduced in 2004 was later amended in 2017 and this is the law that is effective as of now.

Tax Savings on Gifts

The Gifts Act of 2017 states that any gifts that are worth more than Rs. 50,000 per year are liable for tax calculations, and gifts that are lesser than Rs. 50,000 are completely tax-free. There are certain things  that you should remember while tax calculations are done on gifts:

• Gifts which are worth more than Rs. 50,000 is taxable under “income from other sources”
• In the case of movable properties where a property is gifted, then taxes are charged on the value of the property and stamp duty. 

There are certain instances where gifts are completely taxed free such as the following:

• If a gift is received from a relative, then that is tax-free. The term relative is restricted to spouses, parents, siblings, grandparents, etc. Please understand that the gift received from a family member, for instance, a bank fixed deposit will be tax-free. However, the interest earned from bank deposits will be taxable. 
• When employers give gift to the family of the deceased employee, then that is tax-free. This gift can be in the form of money, gratuity, bonuses, or more.
• Gifts received in the form of inheritance by a family member are also tax-free.
• Gifts received during the marriage from family members or distant relatives are also tax-free. 

Tax Savings Tips on Gifts

There are certain ways in which you can enjoy tax savings on gifts. Listed below are a few tips for the same:

• If you wish to give gift something, then you can invest in tax-free options. For instance, you can gift your parents with the Senior Citizens Savings Scheme which is tax-free.
• You can give gift investment plans to your dependents who are non-earning individuals. Doing so will help you get tax-free investment options.
• You can do an investment in the name of your child who is below the age of 18 years, as this will not involve tax liabilities. 

You can enjoy the above tax savings as specified under Section 80C, Section 80D, and other sections of the Income Tax Act.

Take Away

So, now that you know how to get tax savings on gifts, you know how to reduce your tax liabilities. For enjoying the benefits of investment, you can explore a number of investment plans in InsuranceDekho.

Also read: Tax Saving Options for Senior Citizens