Capital Gains Tax On Gifting And Financial Planner's Take On Exemptions

When it comes to giving or transferring assets, there are specific conditions when it comes to exemptions and taxations. Capital gains have exemption up to a threshold that are given by close relatives, who are specified under the act are tax-free.

In India, gifts received from specified relatives are exempt from income tax under Section 56 of the Income Tax Act. Gifts in the form of cash or movable or immovable property received from relatives such as parents, spouse, siblings and lineal ascendants or descendants are not taxable irrespective of the amount.

"However, gifts received from non-relatives exceeding Rs 50,000 in a financial year are taxable under the head Income from Other Sources," Pankaj Mathpal, founder of Optima Money Managers, said. "Ensuring proper documentation, especially for high-value transactions, is important to avoid future tax scrutiny."

Another exemption to note is gifts received on the occasion of marriage, whether in cash or kind, are exempt from income tax, regardless of whether they are received from relatives or non-relatives. Under Section 56 of the Income Tax Act, gifts in the form of cash, movable or immovable property received during marriage are not taxable.

"This exemption applies only to the bride and groom and not to other family members receiving gifts on the occasion. Proper documentation of high-value gifts is advisable to avoid scrutiny by tax authorities," Mathpal added.

As far as giving non-blood relations goes, there will be taxes that apply. "Govt, for good reason, has kept gifting away from tax-free movement of assets. There will be a lot of bribery and corruption when it comes to reasons," said Santosh Joseph, founder of Germinate Investment Services.

As the threshold and taxation on gifts stands justified, there are certain provisions that can help better giving as well.

"Transfer to blood relation is tax free up to a threshold and that is a benefit that people continue to enjoy. In India, charitable giving is also growing. We need some provisions for this," he added.

With more exemptions or thresholds that can specifically be set in place for charitable giving, there can be better facilitation of this kind of giving.