Received Gifts for your Marriage or on your Will? You Don’t Have to Pay Income Tax

Apr 08, 2019 | 6 months ago | Read Time: 3 minutes | By iKnowledge Team

Marriage or inheritance do not call for tax deductions. We tell you how.

Under the latest income tax provision, a gift received under special circumstances is not liable for tax deductions. Specified occasions or circumstances such as marriage or inheritance do not call for tax deductions. Apart from these circumstances, any money/property received without any consideration is subject to income from other sources.

That’s why, it is recommended to document the gift (for example a legal document such as a gift deed is essential when the gift amount involved is large. Having a track record is beneficial and can come handy at the time of your need.

Any cash gifts that you receive can also be documented (it may involve the name of the person, the amount of money gifted). The documentation can be asked for by the tax authority in case if questions arise.

However, under Section 56(2) (x), the total valuation of the gifts received on occasions such as marriage is not covered in income thus it need not be reported in tax returns. Furthermore, there are schedules in the IT form that ask for details of exempt to be disclosed. The nature of such income is described as dividend etcetera, interest and the residual clause on other exempt income.

Interestingly, there have been many cases where people try to claim exemption by faking the relationship with a person. However, as mentioned above, the income tax rules are quite clear with regards to whether the gift is exempted from tax or not.

If you receive a gift from:

  • Parents
  • Spouse
  • Your and your spouse’s brothers and sisters
  • Brothers and sisters of your parents
  • Your lineal descendants (including spouses)
  • Lineal descendants (including spouses) of your spouse

Many people make use of this gifting strategy to save money from taxation. While one can deem it as wise tax planning, others might provide you better options than to spend on gifts. The gifts you give to your loved ones will depreciate with each passing year in value, so, it’s wise to give a gift that lasts for life. A life insurance is a timeless gift, and here are its dual benefits of purchasing insurance:

  1. You gift your loved ones with the most precious thing – their financial security
  2. You get the tax benefits

As mentioned above, life insurance won’t just help you save a considerable amount of money through tax exemption, but it will also help in securing your loved ones’ financial future.

Why life insurance for tax benefits?

Life insurance offers added benefit of saving taxes under Section 80C and 10(D), but this benefit pales in comparison to the financial protection you leave your family. This means, when you are not around, a life insurance will take care of your loved ones’ and their lifestyle.

Term Life Insurance Before Tax Benefits

It is recommended to consider the duration, life cover, premium cost of a term life insurance before thinking about tax benefits. There are a host of insurance policies being offered by financial institutions around the country. Aegon Life’s diverse offerings which include products such as iTerm & iTerm Plus Insurance Plan for term life insurance will be great options to consider. Furthermore, with iTerm, you can add riders to the same plan based upon your preferences to make the term plan an exclusive one.

Go ahead, and gift a life insurance today!

II/Mar 2019/4890

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