Decoding income tax rules on gifts

In India, almost every employer offers gifts to their employees on various occasions during the year. As per the Income Tax Act, if an employer offers any gift voucher in kind or cash amounting to less than Rs 5,000 during the financial year, then it is wholly exempt. However, if the amount of gift exceeds Rs 5,000, then the whole amount is treated as part of salary and taxed as a 'perquisite', according to one’s tax slab.

Gifts received from friends will be treated as 'income from other sources' and taxed accordingly. Tax is to be paid in case aggregate of gifts received during a year exceeds Rs. 50,000 in a year and the same need to be mentioned in ITR. There is no tax liability as long as gifts received are within the threshold of Rs 50,000 a year, Sehgal said.