This Women’s Day, how about giving a cash gift to your wife? Giving a cash gift may be a good idea as it is something that is useful in all circumstances. But it is important to understand how much cash you can gift without any tax implications.
Experts say that cash gift up to Rs 50,000 from anyone will not have tax implications in normal circumstances.
However, in case of cash gift from husband, there is no such limit on how much cash can be gifted without tax implications. In other words, a man can gift any amount to his wife without any tax implication.
“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’),” Dr. Suresh Surana, Founder, RSM India, told FE Online.
“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.
However, there is a catch!
As per the tax laws, any person cannot receive more than Rs 2 lakh or above in cash from a person in a day in a single transaction. Therefore tax experts say it would be advisable to restrict your cash gift to Rs 2 lakh.
“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 Dr Surana.
Tax on income from cash gift
Even as cash gift will be tax-free in the hands of wife in our case, any income from such investment of such amount would be taxable in the hands of the husbands.
“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,” said Dr Surana.
“Thus, the clubbing amount needs to be factored into the tax planning before making such a cash gift to the wife,” he added.