Income tax is a tax payable on income. Unfortunately, at times, the tax laws end up taxing receipts that are not really incomes, or which are really capital receipts or return of capital. Gifts are a classic form of capital receipt, which, under tax laws, are treated as a regular income, and are taxed at your slab rate of tax. The provision, which is meant to plug loopholes for tax evasion through fictitious gifts, unfortunately, also impacts genuine cases. Another kind of capital receipt that is taxed is gains on sale of assets.

Source: Mint July 06, 2021 20:26 UTC