Let me tell you we are all for love 🙂 ; but remember never mix Love and Taxes!
The Income Tax (like a frumpy old aunt) has laid down that any Gifts (cash or kind) outside what are called ‘Relatives’ shall be taxed. What more, Income Tax has gone ahead and defined who shall be called ‘Relatives’!
– Your husband or wife is a Relative (hint : get married and then gift)
– Your brother/sister or your spouse’s brother/sister (including their spouses)
– Your parents and your spouse’s parents
– Lineal ascendants and descendants of either of the parents are also included.
So any gifts to these so called ‘Relatives’ (defined by the Income Tax Act) are exempt from tax.
[Do remember in case the gift is taxable – the receiver shall pay tax on it.]
Now are your worried that you spoiled your valentine with an expensive gift?
The Income Tax Act does not consider a ‘love interest’ as a Relative.
Fortunately though, gifts up to Rs 50,000 to anybody in a financial year are exempt from tax. So for gifts worth Rs 50,000 in a year to your beloved – no tax is payable. These could be several gifts adding up to Rs 50,000 or a single gift of Rs 50,000. However, in case the total value of gifts exceeds Rs 50,000 in a financial year – the entire amount shall be added to the taxable income of the receiver and he/she will have to pay tax on it. This will be taxed as per tax slabs applicable to the person and shown under the head ‘Income from Other Sources’.
Be indulgent in love but be careful about gifts!
Want to know in detail about tax implication of Gifts, find it here.