According to the Income Tax Act, every person can receive gifts worth Rs 50,000 annually without having to pay tax on it. But if they receive gifts valued say Rs 52,000, then the entire Rs 52,000 becomes taxable.
Since Indian weddings don't work without the philosophy of ''gifting-shifting'', the IT Act gifts the married couple a BIG exemption. All marriage gifts from immediate family, relatives and friends are non-taxable.
THE HISTORY OF ''BLESSING IN PRESENTS''
Remember the scene from movie 2 states when Duke's family asks for a ''bigger car'' to marry Minti, even though he just makes Rs 25K per month? Or the engrossing scene in 'Made in Heaven' when Priyanka's parents are forced to pay Rs 4 crore in dowry? You could also see comedian Aishwarya Mohanraj's recent Youtube vlog where she casually mentions that she just gifted her fiance a car.
Well, gifts, relatives, and Indian weddings have been sticking together like BFFs for some generations now. Even the income-tax department knows this. For them, tracking wedding gifts might be quite a herculean task because of 2 main reasons:
Given that Indians treat gifting as a right and a responsibility, the income-tax laws have some gift tax leeways on ''account of marriage''. This honestly seems like a wedding gift in itself to the newly married couple. Here's what it looks like:
1. Who gets the ultimate benefit?
Say you and your fiancee are getting married. The gifts you and your fiancee receive on account of this happy transition are non-taxable for both of you. So, no special tax rates, deductions, exemptions, or tax by slab rates on the value of these gifts that you both receive.
2. Who can gift you what? And what kind of gifts can they get you?
3. What about gifts that your family and relatives receive at your wedding?
Unlike you, they have to report all gifts (both cash and kind) under 'Income from Other Sources' as they are not covered under this tax benefit. But if the total value of their gifts is below Rs 50,000, they don't have to pay tax on it either.
4. What happens if you and your fiance make money out of your wedding gifts?
Say you and your fiance decide to rent out the flat you received as a wedding gift and receive Rs 15k as monthly rent. Or say that the cash you received in those red envelopes on your wedding day was deposited in an FD and you received interest on it. What happens to this additional income of rent and interest? Though the home and the cash itself are exempt in your hands, the income you generate from this gift will be taxed. So the rent and FD interest will be added to your income. If you sell your wedding jewelry a few years later, you might have to pay tax on the capital gain in the year of sale.
5. Does no one else have to pay tax?
If the I-T department finds something fishy in your wedding transactions, it can club your income in someone else's hands (mostly the person who gifted you) and can tax them. They can also impose taxes and pile penalty and interest charges if the transactions are found to be tax avoidant.