Tax on gifts from in-laws, exemption for gifts from siblings

We all enjoy receiving gifts. On various occasions, we give gifts to our parents, spouse, children, relatives and friends. Often, money is also given as a gift.

However, do we know from whom receiving a gift is tax-exempt and from whom it is taxable?

The National Board of Revenue (NBR) has recently made certain amendments to the tax treatment of such donations or gifts. Let us now look at from whom gifts will be taxable and from whom they will not.

Gifts or donations made within four categories of relationships are completely exempted from tax. The recipients are also not required to pay any tax. Money as well as movable and immovable property may be transferred without any hesitation.

These four categories are: husband and wife; parents; children; brothers and sisters.

For a long time, gifts made between spouses, parents and children have been tax-exempt.

From the current financial year, the scope of tax-exempt gifts has been expanded to include biological brothers and sisters, in addition to spouses, parents and children.

This means that gifts exchanged between siblings will now remain tax-free.

Non-resident Bangladeshis often transfer money to the bank accounts of their brothers and sisters and also give valuable gifts. Many expatriate workers send remittance funds to their siblings bank accounts.

Although remittance income is tax-exempt, the matter was not previously clear in this context. This amendment has now clarified the issue.

Under the Income Tax Act, any transaction exceeding Tk 500,000 must be conducted through banking channels.

Not only cash, but the transfer of ancestral land, flats and other movable and immovable assets will also become easier, as both movable and immovable property are included within the scope of gifts or donations.

To explain with an example: suppose your brother gives you Tk 200,000 as a gift, which you declare in your annual tax return. No tax will be imposed on this amount. Similarly, your brother must mention this gift or donation in his own tax records.

If you receive money, jewellery, land, flats or other assets as gifts from your in-laws, tax will be imposed. This is because in-laws are not included in the list of relationships eligible for tax-exempt gifts.

Gifts from fathers-in-law, mothers-in-law, brothers-in-law, sisters-in-law and other relatives from the in-laws side fall within the taxable scope.

In short, gifts received from anyone other than a spouse, parents, children, or full brothers and sisters will be subject to tax.

There have been allegations that some individuals declare assets received from their in-laws as gifts in their tax records, while the donors do not report the transfer of such assets in their own returns.

In this way, illegally acquired income or assets may be shown as legitimate. To address this, the National Board of Revenue (NBR) has clearly defined which donors and recipients will be exempted from tax and which will not.

According to NBR sources, if a gift is received from anyone other than parents, siblings, spouse, or children, it must be declared in the annual income tax return and tax must be paid accordingly.

Likewise, the person giving the gift must also disclose the gift in his or her income tax return.