Gift Tax Act And Why Gifts Are Taxed!
8 March 2013
The Gift Tax Act is one Act that is truly despised by many. This is because many of us believe that the action of gifting someone money, an object of desire, or even property, was a noble gesture and to tax such a gesture was truly appalling! However, what most of us fail to understand is that this noble gesture is actually used by many so that they can make use of loopholes in the tax system and save on taxes by using the route that gifts offer. Hence, to disallow such actions where even gifts are used as a means to evade taxes, the Government of India introduced the Gift Tax.
The Gift Tax Act was introduced in the year 1958 and ceased to exist in its previous avatar in the year 1998. Even so, there are today enough provisions in the Income Tax Act so that every gift that is liable for taxes is accountable. Therefore, if you happen to receive an expensive gift, take some time out from your rejoicing and pay attention to the tax implications too! The period when the original Gift Tax Act ceased to exist and then renewed in a new avatar saw a considerable amount of activity in the form of evasion of taxes through the loophole brought about by the withdrawal of this Act. The current provisions of the law are therefore a lot more rigid.
As per the original Gift Tax Act, any gifts that were worth more than Rs. 25000 were subject to taxes. The inclusions were cash as well as cheques and drafts received from someone who was not a blood relative. The Act ceased to exist in October 1998 and after a gap of almost six years, special provisions in the Income Tax Act of 1961 were made with reference to Gift Tax. The Gift Tax Act therefore, may have ceased to exist, but the same tax implications now exist through the Income Tax Act.
Check out our awesome video explaining you the provisions of gifting