Cash might be frowned upon in the west as thoughtless, but in my opinion, and it is an unpopular one, cash gifts are the best kind of gifts because they give you the freedom to utilize them in any way that you want.
Deposit your cash gifts
If you receive cash, my advice would be to put them in the bank account as soon as you can. I am aware of the general hesitation among women with depositing cash gifts, especially those that involve larger sums of money, like the ones from say, generous relatives or the cash gifts received from functions conducted for your children. The usual question that pops up is, ‘Will I have to pay tax on it?’
Well, you don’t. Here’s how the Income Tax Act sees cash gifts:
The Income Tax Act on cash gifts
Cash gifts are exempt from tax with a maximum limit of Rs 50,000. This means that if you receive cash gifts less than Rs 50,000, you can deposit it in your bank account without any worry about paying tax on it. Bear in mind though, that this Rs 50,000 isn’t for one transaction, but the total sum of cash gifts received during the year. If you receive more than Rs 50,000 in cash gifts during the year, then the amount that you received in excess of Rs 50,000 will be subject to tax.
So, if you receive Rs 30,000, there’s no tax, but if you receive Rs 60,000, then you’ll have to pay tax on Rs 10,000.
If you receive cash gifts in excess of Rs 50,000 from a function that you conducted for your child, it makes good sense to split the amount between you and your husband because that way, both og you can utilize the exemption effectively. This applies even if you are a home-maker (in fact, it’s even better if you’re a home-maker). Here’s an example:
Cash gifts from relatives
The Income Tax Act does not cap gifts received from specified relatives, namely your parents, your siblings, the spouses of your siblings, your husband, your husband’s siblings and your parents-in-law. So, if your parents want to give you a large sum of money, or if you need to give your parents or siblings a large sum of money, don’t even think about going the cash route. Cash is unsafe, cash can be intercepted, and cash hoarding is a terrible habit.
Cash gifts received during weddings
There is no maximum limit on cash gifts received on the occasion of weddings either. Given that it is wedding season, please tell all the new brides (and brides to be) that you know to deposit the money in their bank accounts. If you are lucky enough to receive a considerable sum of money as a cash gift, put it in your bank account and use to either refund some of the wedding expenses back to your parents, use it to shop when you’re on your honeymoon, invest it or use it to do a combination of these things. There is a lot of cash movement that is seen during weddings from the parents of brides – remember that dowry is not only deplorable, but also an offence punishable by law. It is far wiser for parents of new brides (especially young brides) to set their daughters up with a bank account that is to be used by her and her alone. Financial independence is the best gift any girl can receive.