Getting gifts at your child's wedding? It could trigger a tax headache

Wedding gifts are tax-free for the bride and groom, but not for their parents. They need to watch limits, paperwork and rules, or risk a surprise tax bill.

When it comes to wedding gifts, Indian tax law draws a sharp line between the bride or groom and their parents. While all gifts received by the person getting married are completely tax-free, the same does not apply to their parents.

 

How  do rules differ for parents versus children?

“Gifts received by the individual getting married are fully exempt from tax, regardless of the value or the donor. However, this exemption does not extend to their father,” explained Ritika Nayyar, partner at Singhania & Co.

 

For a father, the general provisions of Section 56(2)(x) of the Income-tax Act apply.

 

 

In simple terms:

 

From relatives: Gifts are fully exempt

 

From non-relatives: Exemption limit is up to Rs 50,000 in aggregate in a financial year. If the threshold is crossed, the entire amount becomes taxable at the father’s applicable slab rate.

 

“Parents often assume they too can receive wedding gifts tax-free, but the exemption is strictly for the bride or groom,” said Niyati Shah, chartered accountant, vertical head, personal tax at 1 Finance.

 

Cash versus gifts

 

The Rs 50,000 threshold applies uniformly to cash as well as gifts in kind.

 

“For cash, once the limit is crossed, the whole amount is taxable. For movable assets like jewellery or shares, the fair market value is considered. For property, the stamp duty value applies,” Nayyar explained.

 

Shah also cautioned against non-compliance.

 

“Under Section 269ST, receiving Rs 2 lakh or more in cash from one person on such occasions invites a penalty equal to the sum received. Using banking channels is safer.”

 

Documentation is key

 

Both experts stressed that documentation can make or break a case during tax scrutiny.

 

-Maintain a gift register with donor details, relationship, date, and value.

 

-For valuables, keep valuation reports or invoices.

 

-For cash and transfers, retain bank proofs and avoid cash above limits.

 

-Link gifts to the occasion with the wedding invitation, bills, or photos.

 

“If the gifts are taxable, they must be reported under ‘Income from Other Sources’ in the ITR. If exempt, it is advisable to disclose them under ‘Exempt Income’ for transparency,” Shah said.

   

A real-life example

 

Shah shared an example.

 

A father received Rs 700,000 via bank transfer from non-relatives, Rs 500,000 from relatives, and jewellery worth Rs 350,000 from his sister at his daughter’s wedding. The Rs 700,000 became fully taxable, while the rest was exempt. “Transparent reporting avoided penalties and litigation,” she noted.

 

Bottom line

 

Wedding gifts for the parents are not by default tax-free. Unless received from specified relatives or within the Rs 50,000 limit for non-relatives, they are taxable. Proper paperwork and disclosure can prevent disputes with the tax department.