From an income tax perspective, there shall be no tax implications if the aggregate cash received as gifts does not exceed Rs. 50,000 in a financial year.
Question: On the occasion of Diwali, please guide me on how much money one may get as a gift without attracting any tax obligations.
Answer by Dr Suresh Surana, Founder, RSM India: In accordance with provisions of Section 56(2)(x) of the Income Tax Act, 1961 (‘IT Act’), if the aggregate sum of money received by an individual exceeds Rs. 50,000 without any consideration during a particular Financial Year, then such sum shall be chargeable to tax under the head ‘Income from Other Sources’.
In simple terms, if an individual receives a cash gift either from one or multiple persons on the occasion of Diwali, and the aggregate value of such receipt exceeds Rs. 50,000 during a particular financial year, such amount will be taxed at the slab rates applicable to that person.
Hence, from an income tax perspective, there shall be no tax implications if the aggregate cash received as gifts does not exceed Rs. 50,000 in a financial year.
It is also pertinent to note that, if an employee receives any Gift in Cash from his/her employer, then the whole amount received as gift (even if it does not exceed Rs. 50,000) shall be taxable under the head ‘Income from Salary’. Further, as per Rule 3(7)(iv) of the IT Rules, if an employee receives Diwali gift in kind (voucher/hampers/token) and the aggregate value of such kind is Rs. 5,000 or more in a financial year, then the same shall be subject to tax as a perquisite under the head ‘Salary’. If, the aggregate amount of gift in kind is less than Rs. 5,000, the same will be exempt from tax.
Provisions relating to gift by way of cash or kind, movable or immovable property are stated in Section 56(2)(x) of the IT Act which are summarized in the following table:
| SR.NO. | TRANSACTION | CONDITION | TAXABLE AMOUNT |
| 1. | Sum of money received without consideration | Aggregate value exceeds Rs. 50,000 in a Financial Year (“FY”) | Entire sum of money received |
| 2. | Certain Movable Property (Shares and securities, Jewellery, etc.) received without consideration | Aggregate FMV exceeds Rs. 50,000 in a FY | Entire FMV of the property |
| 3. | Immovable Property received without consideration | Stamp Duty value of the said property exceeds Rs. 50,000 | Entire Stamp Duty Value of the property |
From the above table it can be inferred that if the value of the gift given (be it cash, movable property or immovable property) exceeds Rs. 50,000 the same will attract income tax.
However, the IT Act explicitly states that the provisions of Section 56(2)(x) will not be applicable if an individual receives gifts from any of his/her relatives. Further, the term “relatives” has been specifically defined. Thus, in case of any Diwali gifts received from such specified relatives would not be subject to tax.
“Relative” means, in case of an individual—
(A) spouse of the individual;
(B) brother or sister of the individual;
(C) brother or sister of the spouse of the individual;
(D) brother or sister of either of the parents of the individual;
(E) any lineal ascendant or descendant of the individual;
(F) any lineal ascendant or descendant of the spouse of the individual;
(G) spouse of the person referred to in items (B) to (F).
Source: https://www.financialexpress.com/money/income-tax-how-much-cash-can-i-receive-as-a-gift-without-attracting-any-tax-obligations-3307769/
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