Gift tax rules in India is quite elaborate and people sending or receiving gifts need to be conversant with it to avoid paying penalties.
The rule is quite clear on the fact of the gift tax rate, which does not charge anything up to the limit of Rs. 50,000 on an annual basis.
However, if a person receives a gift in cash or kind in a year exceeding the upper limit, then they have to pay the tax on gift for the entire amount and not just the amount exceeding the upper limit.
The entire amount adds up to the total income of that person and become payable according to the relevant income tax slab.
Therefore, its quite clear that gifts taxable according to the concerned Indian rules governing it takes an all or none approach.
However, the law provides certain leniency in the form of rules governing the gifts received from ‘relatives’. According to the gift tax rules, relatives include parents, spouse, siblings, siblings of spouse, and all the lineal ascendants and descendants of the person concerned and his or her spouse.
People receiving any gifts in either cash or kind need not pay any gift tax in India. Moreover, the law stipulates that a husband sending gifts for wife in India need not pay any taxes unless the wife invests it somewhere and receives dividend or makes profit. Thus, people can send gifts to their spouses without any concerns over their tax liabilities unless the gifts is something invest-able and is likely to produce dividends.
Gift tax India takes quite a generous perspective regarding receiving of gifts from relatives.
Moreover, wedding gifts do not entail payment of any taxes regardless of their monetary value.
Thus, gifting the newlywed a handsome amount on their wedding can be the best wedding gifts ever because they will be able to avoid paying steep taxes. The law is a bit ambiguous regarding until when a gift received qualifies as a wedding gift, but the best bit is to present the gift on the day of wedding or close to it.
Thus, judicious planning can help people in making the most of loopholes present in gift tax rules in India.