In a financial year, receiving gifts whose total worth amounts to more than Rs 50,000 from non-relatives is taxable. Gifts offered by the following relatives are tax exempt:
- Siblings of self and spouse
- Siblings of either parent
- Lineal ascendants or descendants of self and spouse
- Gifts to spouses or minor children will attract clubbing provisions.
Gifts received on occasions such as marriage and religious ceremonies do not attract tax.
If a house is purchased at a price lower than the stamp duty value and the difference in prices exceeds Rs 50,000, the amount is then considered as a taxable gift.
Here are the common reasons where you must cross-check before handing over your income tax return (as published in ET Wealth on Feb 13, 2012):
- Ignoring income from investment in the name of spouse, kids.
- Ending life insurance policy before 3 years.
- Not including interest income in your tax return.
- Selling a house bought on loan within five years.
- Not including ornaments in wealth tax.
- Not paying wealth tax on second house.
- Both spouses claiming tax benefit on same expenses.
- Withdrawing PF within five years of joining a company.
- Taking benefit of basic exemption limit twice in a year.