In India, it is common to receive a shower of jewellery and precious gifts from relatives and friends as soon as the wedding season arrives. But often the question arises in people’s minds whether tax has to be paid on such expensive gifts? Especially when the price of the jewellery is in lakhs. There is confusion about whether the Income Tax Department will consider it as income and collect tax. Let’s understand what the real rule of the Income Tax Act says.
Provisions related to marriage in the Income Tax Act
Section 56(2)(x) of the Income Tax Act, 1961, clearly states that if gifts or jewellery are given to the bride or groom on the occasion of their marriage, then no income tax is levied on them. Whether the price of the jewellery is two lakhs or more, the gift received on the wedding day is completely tax-free. This relief is applicable only on the wedding day and only on gifts received by the bride and groom.
Gifts from non-relatives are also tax-free
The law also makes it clear that if not only relatives but also friends or other people give gifts at a wedding, then they will also not be taxed. The condition is that the gift should be given to the bride or groom on the occasion of the wedding.
When is tax levied?
If a gift is given on any occasion other than the wedding, then the matter changes. According to the tax department, if the gift received on any day other than the wedding is more than Rs 50,000, then it will be considered taxable income. The same rule also applies when expensive gifts are given to other family members, such as parents or siblings, other than the bride and groom, on the occasion of the wedding.
Capital gain tax aspect of jewellery
There is no immediate tax on jewellery received at a wedding, but when these items are sold in the future, the rule of capital gain tax applies. If the jewellery is sold within three years of purchase, then short-term capital gain tax may have to be paid, and if sold after three years, then long-term capital gain tax may have to be paid.
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Why is it necessary to keep proof?
Tax experts believe that there is no tax on gifts and jewellery received at a wedding, but it is always beneficial to keep proof. If the identity of the gift giver, wedding card, photo and receipt of the jewellery are kept safe, then it becomes easy to calculate any tax-related investigation or capital gain in the future. It is considered wise to show such gifts as ‘Exempt Income’ while filing an income tax return.