RM 2.6 Billion Dollar Question on How Gift Should Be Treated?
This is a question we get asked a lot - do I need to pay taxes when I receive a gift?
Well, the simple answer is no. BUT in the event whereby the tax authorities ask for capital statements, it could become an issue because let's be honest, most of us do not record or keep any documentation as evidence for our gifts. So now the question becomes - what should I do when it comes to gifts?
"When a gift is given voluntarily on personal grounds, and is unconnected to an employment, business transaction or any profit-related venture, it will not be taxable."
"There are specific exemptions under Schedule 6 of the Income Tax Act 1967 for certain gifts and two important ones are long service awards (limited to RM2,000 for each year of assessment provided the employee has been with the same employer for more than 10 years) and gratuity on retirement from employment (upon reaching the age of 55 or due to ill health)."
Read this article to find out more.
In a nutshell, it's best practice to keep a proper documentation of the intention behind the gifts and to always ensure that at any given time, the donor is willing to disclose the source of funds. As tedious as it sounds, it's important to keep track of everything when it comes to finances.
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