What is the best way to show love and affection? Well, quality time can be the right answer, but a gift can also show the same appreciation sometimes. But, what if your gift has a substantial financial value? It’s legal, but asks you to pay some taxes. There are certain parameters you need to follow when it comes to gifts. If you exceed the recommended limit, then the government sees it as a taxable income instead of a gift.
Points to remember when sending or receiving high-value gifts
Gifts from some of the family members are legal irrespective of the amount. These relations include father, mother, sister, brother, and spouse. Lineal descendent and ascendants of an individual, his spouse, her sister, or brother are also included in these relations. Yes, it is legal and tax-free to gift any amount of cash to these family members.
On the other hand, the gift might be taxable in some cases. For instance, an Indian resident has an annual turnover of 15 lacs and he gifts 2 lacs to his spouse. The lady wanted to save and created an FD. Now, the interest will be taxable because it’s an added income.
Things change if you are residing in the US because then you are allowed to gift a maximum of $15, 000 to a single person. You need to file a gift tax return for the same, but there will not be any tax for the gift.
Best way to gift
If you want to gift some liquid cash as a gift, then it’s best if he or she is elderly. It’s also beneficial if the recipient is your studying or low earning child. When you give any amount away, it will remain legal, but taxable to you. However, if they invest the money in a band or business, it could be their permanent source of income.