Your Questions Answered: Is financial help from relatives or charities for hospital expenses taxable?
Q. Back-to-back hospitalisation of my family members caused me huge financial loss during the last financial year. I approached a few charitable institutions and some of my relatives for financial help. We have received around 10 lakhs as donations in various bank accounts. Will this money be treated as our income? What declarations do I need to make and obtain for such donations?
The money received by you though mentioned as a donation is nothing but gifts. All gifts whether received in cash or in kind are tax-free in the hands of a recipient as long as the aggregate value of all the gifts received during one financial year does not exceed fifty thousand rupees.
Once the value exceeds this threshold limit, the full value of all the gifts become taxable in the hands of the recipient. The threshold is determined with reference to each recipient and not for the family as a whole.
So in case the gifts have been received in the name of various family members the same would be tax free in the hands of the respective family members where the aggregate value of gifts received from all the sources does not exceed fifty thousand rupees in a year.
Exemption for gifts from relatives
Not all gifts received are taxed. Gifts received from specified close relatives are not taxed and are fully tax free in the hands of the recipient. Broadly the definition of relative includes parents, siblings of the recipient and the parents, spouse of these persons etc. So in case the donations have been received from some of your specified close relatives, the same will be tax free and you need not include these donations in your taxable gifts.
The taxable value of all the gifts as explained above will be taxed under the head “Income from other sources” and the same will be taxed at the slab rate applicable to you on your total income.
I understand this is harsh on you but we cannot change the law. Even though these donations are taxable in your hands, you still will have to prove the identity of the donor and their capability to avoid it being taxed at a flat rate of 60%. Please obtain a written confirmation with the PAN number of all the donors to avoid any complication in future.
Read all our personal finance stories here.
Balwant Jain is a tax and investment expert and can be reached at [email protected] and @jainbalwant on his X handle.
Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
