Consider giving your wife a monetary gift this Women’s Day. Giving a cash gift is a good idea because it is something that can be used in any situation. However, it’s crucial to know how much money you can give without incurring any tax consequences.
In most cases, experts say, a cash gift of up to Rs 50,000 from anyone has no tax implications. In the case of a cash gift from a husband, however, there is no such limit on the amount of money that can be given without incurring tax consequences. Inother words, a man can give his wife any amount he wants without incurring any tax consequences.
“In normal circumstances, cash gifts upto Rs. 50,000 are not subject to tax in the hands of recipient. However, such threshold limit is not applicable in case the cash gift is received from a specified relative (which includes spouse) under section 56(2)(x) of the Income Tax Act (‘IT Act’),” said an expert.
“Thus, cash gift by a husband to his wife would be exempt from tax irrespective of the quantum in accordance with Section 56(2)(x) of the IT Act,” he added.
According to tax laws, no one can receive more than Rs 2 lakh in cash from a single person in a single transaction. As a result, tax experts advise that you limit your cash gift to Rs 2 lakh.
Income tax on cash gifts
In our case, while a cash gift will be tax-free in the hands of the wife, any income from such an investment will be taxable in the hands of the husbands.
“Section 269ST prohibits any person from receiving any amount of Rs. 2 lakhs or more in aggregate from a person in a day or in respect of a single transaction or in respect of transactions relating to one event or occasion from a person etc. Thus, it is advisable that such cash gifts be restricted to less than Rs. 2 lakhs,” said that expert.
“It is pertinent to note that though the cash gift is tax free in the hands of the wife, any income accrued on such cash gift amount would be subjected to clubbing provisions u/s 64(1)(iv) of the IT Act and accordingly taxed in the hands of the husband,” he said.
“Thus, the clubbing amount needs to be factored into the tax planning before making such a cash gift to the wife,” he added.
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