Are donations received for medical emergencies taxable under income tax laws?

Tax treatment of medical donations

Back-to-back hospitalisation of my family members caused me a huge financial loss during the current year. I approached a few charitable institutions and some of my relatives for financial help. We have received around Rs 10 lakh as donations in various bank accounts. Will this money be treated as our income?

Expert Advice: The money received by you, though referred to as a donation, is treated as a gift under income tax laws. All gifts, whether received in cash or in kind, are tax-free in the hands of the recipient as long as the aggregate value of gifts received during a financial year does not exceed Rs 50,000. Once this threshold is crossed, the entire amount of the gifts becomes taxable in the hands of the recipient.

The limit of Rs 50,000 applies per individual, not per family. So, if the amount was received in the names of different family members, and if the total received by each person does not exceed Rs 50,000, it will not be taxable for them.

However, not all gifts are taxable. Gifts received from specified relatives are fully exempt without any limit. The definition of “relative” includes parents, siblings, spouse, children, and certain other close family members. So, if a part of the amount was received from your close relatives, that portion will not be taxable.

Any taxable gifts will be taxed under the head “Income from Other Sources” at the slab rate applicable to you. Additionally, you must be able to establish the identity and financial capacity of each donor to avoid the tax authorities treating the amount as unexplained income, which could otherwise be taxed at a flat rate of 60 percent. It is advisable to keep written confirmation of gifts along with PAN details of all donors to avoid future complications.

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