Vinit (CA Final ) (188 Points)
26 December 2013Please advise me how can one account fall gift (in jewellery) from relative received in earlier year , in the current years books of accounts as the same was not accounted in the year of receipt.
As the gift from relative is exempt from tax.. whether it will affect the accounting treatement of the same or not.
Thank u..............
NOUFAL
(ACCOUNTANT)
(762 Points)
Replied 26 December 2013
Gifts from Relatives are Tax-Exempt
Importantly, the provisions of the aforesaid Section 56(2)(vi) applicable to the taxation of gifts in excess of Rs. 50,000 in a financial year in the aggregate are applicable for gifts received from non-relatives. Thus, any gift from relatives of any amount during the financial year is completely exempt from tax. Therefore, it's crucial to know the meaning of the expression 'relative' for this purpose. The Explanation to Section 56(2)(vi) provides that the expression "relative" means:
Thus, a gift received by an individual from his spouse, or from his brother or sister, or from the spouse's brother or sister, parents, or from any lineal ascendant or descendant of oneself or one's spouse would normally be fully tax-exempt. Similarly, any gifts of any amount whatsoever received from the spouses of any of these persons would also be completely exempt from income tax.
For example, if Mr. A receives a gift of Rs. 200,000 in cash from his maternal uncle, that is, his mother's brother, it would be exempt since the maternal uncle would be brother of the parent of the individual concerned and would come within clause (iv) of the aforesaid Explanation.
Hence, whenever you receive any gifts from relatives you must carefully apply the test to ascertain whether the person concerned falls within one of the seven categories of "relatives" or not. If a person who makes a gift does not fall within any of the above categories, then he would be considered as a non-relative and gifts from such people would be exempt only up to the extent of Rs. 50,000 in a financial year. It may be noted that since a Hindu Undivided Family can't have relatives, any gifts received by it in excess of Rs. 50,000 in a year would be liable to full income tax.
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