- Diwali shopping includes clothes, electronics, gold, and other items in India
- GST reduction since Sept 22 has boosted consumer spending this festive season
- Personal festive purchases do not qualify for tax deductions in India
Diwali is one of the biggest shopping festivals in India. From clothes and electronics to gold, people love to splurge during this auspicious time.
This year, the festive season in India comes with an added advantage of reduction in goods and services taxes by the government since Sept. 22. This has contributed to a surge in consumer spending. At the same time, sellers are offering attractive deals and discounts to attract consumers.
While spending has increased, people are also hoping to save money. This can prompt many to wonder if their Diwali related expenses qualify for any tax benefits. While as an individual, you cannot claim tax deductions on regular festive purchases, there are some other tax benefits that can help.
Festive shopping such as clothes, sweets, gifts or decorations are considered personal expenses and do not fall under any tax-exempt category in India. However, the government offers tax relief on some gifting items. The gifts can be in the form of cash, cheque or draft.
Under Section 56 of the Income Tax Act, gifts received from relatives are not taxed. This includes the individual's spouse, siblings, siblings of the spouse and siblings of either parent. It also covers lineal ascendants and descendants of both the individual and their spouse. Additionally, the spouses of all these relatives are included, the tax department explains on its website.
However, gifts received from non-relatives (other than mentioned above) are taxable after a certain threshold. If the total amount of money received without any consideration during a financial year exceeds Rs 50,000, it becomes taxable.
To be clear, if an individual or Hindu Undivided Family receives money in a financial year exceeding Rs 50,000, then the entire amount becomes taxable, according to the tax department.
"“Once the aggregate value of monetary gift received during the year exceeds Rs 50,000, then the aggregate value of gift received during the year will be charged to tax," the website states.
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