As the festival of lights fills homes with joy, sweets, and gifts, the tax department has a reminder — your Diwali gifts might come with a tax bill. According to income tax laws, the taxability of gifts depends on who gives them and their total value during a financial year. While gifts from close relatives are tax-free, those from employers or non-relatives may attract tax under the head “Income from Other Sources.” Advertisement

Tax advisory platform TaxBuddy.com recently shared a real-life example that went viral online. Their client, Rahul, received Diwali gifts worth Rs 2.21 lakh this year from his employer, family, and friends. What he thought was a cheerful celebration turned into a surprise when his chartered accountant told him he owed Rs 33,300 in taxes — and possibly interest

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