Income tax

How is cash received as a gift taxed for income tax purposes?

Classroom

oi-Sunil Fernandes

|

Often individuals ask a question, and if I receive a gift and cash or check, how will it be taxed.

How is cash received as a gift taxed for income tax purposes?

If you are an individual or a HUF, if the following conditions are met, any monies received (i.e., a monetary gift may be received in cash, check, draft, etc.) by an individual /HUF will be imposed:

  • Amount of money received without consideration
  • The total value of this sum of money received during the year exceeds Rs. 50,000.

If a sum of money is received on or after 01/10/2009 by an individual or HUF without any consideration and the total value of which exceeds Rs. 50,000 during the previous year, the entire aggregate value of such amount is taxable.

However, in the following cases, nothing will be taxed in respect of any money received by an individual or a HUF without consideration if the same is received:​

  • of any parent or by a HUF of its members; Where
  • on the occasion of the individual’s marriage; Where
  • under a will / by inheritance; Where
  • in the event of the death of the payor or the donor, as the case may be; Where
  • a local authority as defined in the explanation of clause (20) of section 10 of the Income Tax Act 1961; Where
  • any fund, foundation, university, other educational institution, hospital or other medical institution, trust or institution referred to in Section 10(23); [w.e.f. AY 2023-24, this exemption is not available if a sum of money is received by a specified person referred to in Sec 13 (3). or
  • by any fund, trust, institution, any university, other educational institution, any hospital, other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of Sec 10 ; or (applicable if the money is received on or after 1st day of April, 2017)
  • from or by a trust or institution registered under Sec 12a, Sec 12aa or Sec 12ab [w.e.f. AY 2023-24, this exemption is not available if a sum of money is received by a specified person referred to in Sec 13 (3)]. Where ;
  • of an Individual by a trust created or established solely for the benefit of a relative of the Individual. (applicable if money is received on or after April 1, 2017)
  • of such class of persons and subject to such conditions as may be prescribed.
  • From any person, in respect of any expenses actually incurred by the individual for their medical treatment or the treatment of any member of their family, for any illness related to COVID-19 (subject to conditions prescribed by the government).

You have to be very careful when understanding the different sections and their implications. It is best if you have received large sums of money in the form of gifts to seek the professional help of a chartered accountant when filing your tax returns. These standards are constantly changing and therefore need to keep abreast of the latest income tax rules.