Anant Ambani has gifted luxury Audemars Piguet watches worth Rs 2 crores each to Bollywood icons Shahrukh Khan, Ranveer Singh, and several other friends. While these extravagant gifts undoubtedly brought smiles to the recipients’ faces, they also raise a pertinent question: how much tax will the recipients need to pay?
According to the prevailing tax laws in India, gifts can be tax-exempt under specific conditions, such as amounts received on the occasion of marriage or gifts from relatives. For instance, any amount given to Radhika Merchant or Anant Ambani during their wedding would fall under this exemption. However, the gifts that Anant Ambani presented to his friends do not enjoy the same immunity.
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This is because gifts received on birthdays, anniversaries, or from friends are taxable. The tax exemption is only applicable if the total value of gifts received does not exceed Rs 50,000 in a year. Once this threshold is exceeded, the entire amount is subject to tax.
In the case of these luxurious watches, each valued at up to Rs 2 crores, the threshold is crossed. Consequently, the celebrities will be obligated to pay tax. Sujit Bangar, Founder of Taxbuddy.com, explained, “In the Radhika-Anant Ambani wedding saga, the watch received should be taxable. If these watches have been purchased by Anant Ambani in the name of Shahrukh, Ranveer, etc., then they will have to pay tax on its market value as it’ll be considered a cash gift (which is taxable).”
The tax calculated on this amount will be categorized as “income from other sources” under the Income Tax Act. This means that the recipients must declare the market value of these watches in their income tax returns and pay the appropriate tax rate applicable to their income bracket. For high-income individuals, this could mean a substantial tax liability, given that their income likely places them in the highest tax bracket.
Receiving luxury gifts comes with its own set of tax obligations. As the saying goes, “There’s no such thing as a free lunch,” and in this case, there’s certainly no such thing as a tax-free luxury watch.