• Gifts to daughter-in-law are tax free


• If the gift is given to her in-laws, tax will have to be paid


• Is the daughter-in-law not a relative of the father-in-law?

Income Tax Rules: In Indian culture, gifting is always a part of relationship building. It is common to give gifts among family members on festivals, weddings or special occasions. But. Now in terms of income tax department, gift to daughter-in-law is tax free, but if the same gift is given to her in-laws, it may be taxable. To know more about this read the whole news till the end..

What are inconsistent rules?

Under Section 56(2) of the Income Tax Act, if an individual receives gifts of more than Rs 50,000 in a financial year, it is taxed as ‘other income’. However, the government has completely excluded gifts from relatives. The inconsistency of this rule extends to the definition of relative under the Income Tax Act.

According to Indian law, a daughter-in-law is a relative to her in-laws. Therefore, if the father-in-law gifts his daughter-in-law with jewellery, cash or property, the daughter-in-law does not have to pay any tax on it. However, the real problem arises when the daughter-in-law gives expensive gifts to her in-laws. Due to various legal interpretations and old rules, when a daughter-in-law gives expensive gifts to her in-laws, in some cases she is not considered a relative in the same way as a son-in-law or a daughter-in-law.

Why the demand to change this rule?

Recently, some tax experts have urged the government to remove this anomaly. Experts argue in this regard that the law allows daughters-in-law to accept gifts from their father-in-law, but the same right should be extended to their father-in-law. Since this relationship is reciprocal, tax rules should not be one-sided. Also, nowadays, daughters are financially independent. If they want to give property or valuable gifts to their in-laws to take care of them or provide financial support, the current rules are believed to discourage such transactions. Different tribunals have given different rulings on the definition of relative. A clear law can eliminate this complication.

There is another rule called clubbing provisions which, though gifts are tax-free, also make the in-laws liable to tax. In fact, if a father-in-law gifts Rs 1 lakh to his daughter-in-law and she invests the money in an FD, the interest earned on the FD will be added to the income of the father-in-law, not the daughter-in-law, and the father-in-law will have to pay tax on it. People also want the government to simplify these rules too.

Finance Minister Nirmala Sitharaman is expected to make the definition of relative more inclusive and logical in the coming budget. If gifts from daughters-in-law to their father-in-law are expressly made tax-free, it will not only provide relief to middle-class families but also bring transparency in family investments and asset transfers.