Weddings and money: Gifts of gold are not taxed, but…

Weddings in India witness a lot of gold gifting. Apart from gold being gifted by parents, other relatives and in-laws shower the bride with gold. The question is: How is the gift of gold taxed.

Tax lens

Usually, any money or property received by anyone without any consideration is taxed and needs to be filled as “income from other sources” in the income tax returns.

But the good news is that all the gold received during marriage is tax free. “Any gift received during marriage is tax free and so the gold received by a bride in marriage is not taxed. Further, there is no restriction on gold being received during marriage,” says Sujit Bangar, Founder, Taxbuddy.com.

This could be in the form of ornaments, articles, utensils, set in furniture etc. Streedhan received by a lady on the occasion of marriage is not subject to tax, as per Section 56(2)(x) of the Income Tax Act.

Gold offered by any relative, distant or even friends, during marriage isn’t taxed in the hands of the bride or the groom. But is the taxation any different when gold is handed over after the occasion of marriage? Well, it will be tax-free only if select people give it you.

How much is too much?

Many hand over their family jewels to the newlyweds during the marriage as an inheritance. The taxmen cannot restrict possession of gold jewellery or ornaments, as long as they are acquired from sources that can be explained. To be sure, the bride could have received gold during her wedding or may have acquired it later or even inherited it through her marriage.

If the taxman comes knocking, the bride must explain how she got the gold, if she is found to hold gold disproportionate to her income. For instance, if she has inherited the gold, then a copy of the Will or a gift deed would have to be produced.

But, if you have no proof or cannot explain the sources, then certain restrictions are laid in terms of gold possessed by individuals in India. A married woman can hold up to 500 grams, while an unmarried woman can possess up to 250 grams. A man can have up to 100 grams of gold without any proof or documentation of the source.

Raids and seizures

However, if one has unexplained gold jewellery in excess of the above mentioned limits, then it could be confiscated if there is an income tax seizure or raid. If the taxpayer doesn’t offer a reasonable explanation about the money used to invest in gold, then it is taxed.

The Income Tax officers may take into account several factors such as the family’s social status, customs and traditions in order to determine the validity of evidence and statements provided by the taxpayer.

However, there are places where gold cannot be taken away. For instance, if households don’t pay their annual property tax by December 31, the Brihanmumbai Municipal Corporation (BMC), can seize everything including property, air-conditioners, and belongings, but not the streedhan gifted to a woman at her marriage.

Declaration during tax return filings

To be safe, one should keep pictures or other documents, including gift deeds, to support a claim if one has too much gold or has been gifted the same at the time of marrying.

“The donor should have disclosed this gold in regular tax filings. As an abundant precaution, documentary evidence in the form of photographs or any other relevant documents may be kept ready for reference,” suggests Bangar. This mandatory disclosure of your gold holdings must be disclosed every year during income-tax filing, if your income is more than Rs 50 lakh.

Even gems, stones and metals sewn into apparel or set in furniture or another article needs to be declared. But pricing these could be tricky as precious metal prices keep fluctuating. The price of gold was Rs 6,262 per gram as on December 19, 2023.

In case the marriage takes a sour turn, and the couple decides to part ways, gold ornaments will still remain out of the reach of the taxman. “There is no tax implication of divorce on streedhan or gold received during marriage,” says Bangar.

Source Link: https://www.moneycontrol.com/news/business/personal-finance/weddings-and-money-gifts-of-gold-are-not-taxed-but-11935461.html

Website Link: https://www.taxbuddy.com/

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