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Gifts could seem tax-free, but tax rules apply at the time of receipt and later during sale. Both stages can create different tax implications for individuals.
Tax depends on the relationship and value of the gift. Not all gifts are exempt under income tax laws in India; conditions apply.
Gifts from specified relatives like parents, spouse, children, and siblings are fully exempt from tax, regardless of the amount or asset type received.
Gifts from non-relatives may become taxable under the head ‘income from other sources’ if the total value exceeds Rs 50,000 in a financial year.
The person giving the gift does not pay any tax. Gift tax is abolished in India, so no tax liability arises for the giver.
When a gifted asset is sold, capital gains tax applies. Tax calculation is based on income tax provisions for capital gains.
For gifted assets, original purchase cost and holding period are carried forward to the recipient for calculation of capital gains tax.
Gifts may be tax-free at receipt, but can create tax liability later during sale of assets on account of capital gains rules in India.