The Covid-19 crisis and back-to-back hospitalisation of my family members caused me huge financial loss. It is during these challenging times, I received donations from various sources. At least Rs 7-8 lakh in a bunch of Rs 2-2.5 lakh each I have received in my bank account over the last 15-20 days. Will this money be taxable? What declarations do I need to make? Also, will it help if I receive such donation money in different bank accounts?
- Nitish Goyal
By Balwant Jain
The money received by you though mentioned as donation is nothing but gifts. All gifts whether received in cash or kind are tax-free in the hands of a recipient as long as the aggregate value of all the gifts received during a year does not exceed Rs 50,000. Once the value exceeds this threshold limit, the full-value of all the gifts becomes taxable in the hands of the recipient. The threshold is determined with reference to each recipient and not for all the family as a whole. So, in case the gifts have been received in the name of various family members the same would be tax free in the hands of the respective family members where the value does not exceed Rs 50,000.
Not all gifts received are taxed. Gifts received from specified close relatives are not taxed and are fully tax-free in the hands of the recipient. Broadly the definition of relatives includes parents, siblings of the recipient and the parents, spouse of these persons, etc. In case the donations have been received from some of your close relatives, the same will be tax free and you need not include these donations in your taxable gifts.
The taxable value of all the gifts as explained above will be taxed under the head "Income from other sources" and the same will be taxed at the slab rate applicable to you on your total income.
I understand this is harsh on you but we cannot change the law. Looking at the gravity of the situation the government should exempt all such donations/gifts from purview of taxation.
Even though these donations are taxable in your hands, you still will have to prove the identity of the donor and his credibility to avoid it being taxed at a flat rate of 60 per cent. Please obtain confirmation with the PAN number of all the donors to avoid any complication in future.
(The writer is a tax and investment expert and can be reached at jainbalwant@gmail.com)
(Views expressed by the investment expert are his/her own. E-mail us your investment queries at askmoneytoday@intoday.com. We will get your queries answered by our panel of experts.)
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