Tax on UPI Payment: According to the Income Tax Act, any gift received by someone is exempt and falls under the ambit of income tax. For example, if your friend sends an amount of Rs 50 thousand through UPI, very few people will know whether tax will be levied or not.
The way the scope of income tax is increasing and it keeps an eye on every digital transaction, it would not be an exaggeration to say that the income tax department keeps an eye on everything. In such a situation, if your friend sends Rs 50 thousand through UPI, will this money come under the ambit of income tax? What is the provision in the Indian Income Tax Act regarding this and what does the Income Tax Rules say?
Under Section 56(2) of the Income Tax Act, 1961, it is provided that if someone gives you a gift, it remains outside the purview of tax. This Act states that not only the gift but also the amount if someone helps you, that amount will also be outside the purview of income tax. Also, a limit has been fixed for this. Income tax can be levied on the amount beyond that limit.
Gift tax
According to the Income Tax Act, if someone is your close relative, then he can give any amount as a gift. In fact, if someone is a distant relative or a friend who is giving you this gift, then its amount should not exceed 50 thousand rupees. If this amount is more than 50 thousand, then the remaining amount will be added to the income of the person receiving it and tax will also be calculated on that basis.
Who are the closest relatives?
The Income Tax Act has also defined the definition of close relatives with regard to the tax levied on gifts. It states that your close relatives include parents, siblings, spouse, etc. If you have received this gift from them, then this gift is completely tax-free. No matter how big the gift is, if it is given on a special occasion like a wedding, it will remain outside the ambit of tax.
What is the law on transactions?
The Income Tax Department has also made a law regarding reciprocal transactions. If someone gives you Rs 50,000 for business or income or receives this money under services (freelancing, business payments, etc.), then it will be added to the income of the recipient. Tax will also be levied on it as per the slab of that person.
A friend may have given it through UPI…
Your friend may have sent Rs 50,000 through UPI, which is for your personal help. Then it will not be taxable. Whether this amount has been received in the account or sent through UPI. Income tax is levied only on the amount that falls under the ambit of income tax. If your friend is lending you some money, it would be better to have a loan agreement so that it can be verified in the future when the Income Tax Department asks.
