Gift of any amount received is exempt from TAX if received
1. From Relatives or ,
2. On the occasion of marriage or,
3. Under a WILL or,
4. By way of inheritance or,
5.In contemplation of Death.
6.From any local authority 7
7.From any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or
8. from any trust or institution registered under section 12AA.
In all other cases, gift above Rs 25000 received from any person other than list of persons given above is taxable. However, from Asst Year 2007-08 ,it has been provided that receipt of gift exceeding Rs 50,000 in aggregate is taxable.Meaning thereby , a person can receive maximum Rs 50000 from one unrelated person and total receipt of gift in a year from all person can not exceed Rs 50,000.
Whether Rs 50,000 will be deducted while computing taxable income out of gift?
No, even if the gift amount in aggregate exceeds by Rs one , the whole of amount becomes taxable and not Rs one.For example if Mr X receive RS 25000 each from Mr A , Mr B and Mr C . The total amount is Rs 75,000. Therefore from Asst Year 2007-08, tax free gift is only upto Rs 50,000 in aggregate . Mr X has to add in his taxable income Rs 75000 (75000- 50000)
So who are Relatives ?
1. Your spouse
2. Your brother or sister
3. Your spouse's brother or sister
4. Your parents' brother or sister
5. Your lineal ascendants or descendants
6. Your spouse's ascendants or descendants
7. Spouse of persons named in 2 to 6 above.
Follow these principal before accepting gifts ?
Remember, law is well settled that the donee has to prove Identification,genuineness of transaction and capacity of the donor
1. Always take gift by cheque or draft .
2.Get a gift deed mentioning the relationship.Its always better to mention PAN number of the Donor in the gift deed.
3.Its better if the donors' return , P &L account and balance sheet , if available , should also be kept ready .In case required , it should be submitted to A.O.
If you do that, gift can be enjoyed without any botheration in future.