24 July 2019
I am a Jewellery retailer, and I am going to distribute prize to our customer, the prizes would be Car, Bike & Home Appliances, then is their taxes on gifts on my hand or my customer's hand and also tell me the tax rate and relevant section.
31 May 2020
Under the provisions of section 56(2)(vii) of the Income Tax Act, 1961, any sum of money or any property in kind which is received without consideration (in excess of the prescribed limit of Rs. 50,000) than the aggregate of such amount or value of property received by an individual is chargeable to income-tax in the hands of recipient under the head ‘income from other sources’. Even if the property is received by paying some consideration but if such consideration is less than the fair value(for movable property)/stamp duty value (for immovable property) by an amount exceeding Rs 50000. Than the aggregate of such difference shall be taxable as income from other source.
However wef A.y 2019-20, the above provision relating to immovable property has been amended which is as follows:
For a consideration , the stamp duty value of which exceeds 105 percent of the consideration and the difference between stamp duty and consideration exceeds Rs 50000, than the difference amount between stamp duty and consideration shall be taxable as income from other source.
property for this purpose means the following capital assets of the assessee i.e. recipient : immovable property being land or building or both, shares and securities, jewellery, Archaeological collection, drawings , painting, sculpture, any art of work or bullion.
When the recipient is a dealer/business associate
The Companies promote the sale of its products / services through various promotional schemes such as giving incentives by way of gifts /vacation trips to dealers/business associates for achieving certain specified targets. The incentive so received from the Company may be taxable in the hands of such dealers/business associates as business income.
When the recipient is an employee
It is customary in India to give gifts directly or indirectly in the form of vouchers or tokens to employees on social and religious occasions like Diwali, Christmas, New Year, anniversary of the organization, marriages, etc. Such gifts up to Rs. 5,000 in the aggregate per financial year would be tax exempt in the hands of the employees. The excess value of gift over and above Rs. 5000/- would be taxed as a perquisite in the hands of the employees.
It is advisable to maintain documentary evidence in respect of the gifts received, so that any dispute with tax authorities can be avoided during the assessment process.
Enjoy your gifts, but with a pinch of carefulness!
CAclubindia
