Gifts received from 'relatives' are exempt from tax in India

Gifts received by the person who is getting married will be exempt from tax without any limit.

Q: My daughter is getting married in Ludhiana next month. As I have a large circle of relatives and friends, I may receive substantial gifts on that occasion. Would I be liable to pay tax in India on the gifts so received?

A: Under section 56 of the Income-tax Act, gifts received from relatives on any occasion are exempt from tax. However, the word "relative" has been given a specific meaning which includes brother and sister, brother-in-law and sister-in-law, brother or sister of either parent, and your lineal ascendant or descendant. Spouse of such persons is also included. Any amount of gift received from them is exempt.

However, if gifts are received from persons who do not fall within the aforesaid definition of "relative" and the aggregate of such amount exceeds ?50,000, the entire amount is taxable as 'income from other sources'. Such amount would be added to your other taxable income in India and tax would be calculated on the aggregate amount. If the amount is not shown in the tax return, it would be deemed to be concealment of income and penalty would be leviable.

However, gifts received by the person who is getting married would be exempt from tax without any limit, even where the gifts are received from non-relatives. Hence, your daughter who is getting married will not be liable to tax on the amount of gifts received by her.

Q: Bitcoins are gaining tremendous value. My friends in India have invested in these assets. Is there likely to be any government crackdown or regulation?
A: The Reserve Bank of India has not given any licence or authorisation to any entity to operate schemes or deal in Bitcoins or any other virtual currency. Several other countries have placed restrictions in respect of such currency. The Reserve Bank has cautioned that those who invest in any cryptocurrency face potential risk due to intense price volatility.

Bitcoins are purchased and stored online in a digital wallet. An account has to be created with the chosen Bitcoin service provider who would give the investor access to the exchange where the currency can be traded. A public key and a private key are issued. If these are lost, the investor may not be able to access his Bitcoins.

Q: A law was enacted to protect the interest of those who purchased immovable properties in India. This law has been challenged by several builders. Has the law come into effect?

A: The Bombay High Court has recently upheld the legal validity of the Real Estate Regulation & Development Act. Most of the provisions have been held to be constitutional and legal. However, the court has granted extension of time to developers for completing projects in special circumstances on a case-by-case basis.

The court has also held that the Appellate Tribunal should have majority of judicial officers and not bureaucrats. Therefore, home buyers will now have legal remedies against builders who default or delay in giving possession of properties or commit breach of the agreement which has been entered into. Of course, the builders will appeal to the Supreme Court against the decision of the Bombay High Court.

The writer is a practising lawyer specialising in tax and exchange management laws of India. Views expressed are his own and do not reflect the newspaper's policy.