THE OLD SETTLERS OF SIKKIM

Taxation during weddings

by Arnav Pandya

The wedding season is in full swing and in the midst of all the celebrations there is also an income tax angle that the individuals should consider. Adequate attention here will make the entire process of complying with the various tax regulations easier and also ensure that there is no trouble at a later date. One of the main aspects of the weddings includes the various gifts received and here is a way in which this can easily be tackled.

Actual position

A wedding usually involves a situation where the various people attending the function give gifts to the couple and this will include both monetary items as well as some non monetary items. The regulations say that any sum of money or property received would be taxable if the sum of the gift exceeds Rs 50,000 during the year. There are however several exceptions that are present wherein the amounts received would not be taxable. One such condition is that amounts received at the time of a wedding will not be taxable even though the amount might cross the limit that has been set. However in order to complete the process smoothly there is some work to be done by the individual and this needs some close attention.

Keep records

One of the ways in which the situation can be eased is by actually keeping proper records of all the amounts that are received at the wedding. This is usually done in most weddings but there is also the question of what happens to the records once the wedding is over. It is important that the detail of each and every item that is received is maintained properly so that in the end when the totals are tallied it gives the complete picture. Maintaining proper records is also helpful as any queries from the tax officers can also be easily answered with the backing of the records.

Deposits

If there is some cash that is received at the time of the wedding as gifts and which are not spent on various expenses then they can be deposited in the bank account. This should however be done within a reasonable period of time. This will help in convincing the income tax authorities in case there is a call for some explanation or information that the amounts are received as gifts during the wedding. If this matches with the written records that are kept then it will also clear the trail and prove that it does not represent some other income that has been generated. There can be receipts before the wedding given by some close family members and this should be easy to maintain as the entries will be minimal. At the same time the amount received on the wedding and the reception day can be deposited later into the account after all the details are collected.

Clarity in expenditure

Often there are also questions raised over the expenditure that is made at the wedding and the source of income from which these expenses are made. If the tax authorities ask about this point and the explanation is not satisfactory then the tax authorities can even add the unexplained expense amount as the income. This will lead to a tax demand that will arise and this can give rise to a financial hit. This is the reason why the expenses should also be recorded and the manner in which the expenses are met through different sources should be carefully documented so that in case of a situation where this has to be explained it can be done properly.