Outlook Money
There are specific provisions that govern how gifts are taxed.
Between Family Members- Gifts exchanged between the family members are fully tax-free. As per section 56(2) “Family members include the spouse, siblings, siblings of the spouse, siblings of either parent, any lineal ascendant or descendant of the individual or their spouse, and the spouses of all such persons.
Gifts that are exchanged between extended family members and non-relatives that exceed the amount of Rs. 50,000 are taxable unless there is some special occasion like marriage.
Documents; In case of the financial gifts, one needs to maintain the documents ensuring the gift is legal and tax compliant.
There needs to be a written gift deed that specifies the details of the gift, donor, and recipient.
There has to be evidence of the relationship between the donor and recipient, especially for claiming tax exemptions.
For financial gifts, other important elements to be kept in mind include valuation reports and Income tax return.