Cash gifts are fast becoming one of the most sought-after wedding gift options. If you’ve received plenty of cash gifts as a bride, here’s what you can do with them.
Weddings are a time when one receives a lot of cash as gift from close relatives or elders in the family. Cash gifts on your wedding may seem like a very thoughtless gift but it’s definitely better than receiving a juicer/mixer or something that you won’t have much use for. Cash gifts give you the freedom to use them any way you want.
Limit on cash gifts received during weddings:
Cash gifts that you receive in your wedding can be used for a plethora of purposes: if the amount is considerable, then you can use it to start an SIP or put it in a Fixed Deposit; clear any outstanding payments on your bills; buy stuff for your new home etc. Thankfully, there is no maximum limit on cash gifts received on the occasion of weddings.
Additional reading: Go For A Cashless Wedding
The Income Tax Act on cash gifts:
Cash gifts are exempt from tax with a maximum limit of Rs. 50,000. So if you receive cash gifts less than Rs. 50,000, you can deposit it in your bank account without having to worry about paying tax on it. However, if you receive more than Rs. 50,000 in cash gifts during the year, then you will have to pay tax on the amount that you receive in excess of Rs. 50,000. So if you receive cash gifts amounting to Rs. 30,000, then you don’t have to pay any tax on it but if you receive Rs. 70,000, then that Rs. 20,000 excess of Rs. 50,000 will be subject to tax.
Additional reading: Got A Bulk Of (Legit) Cash To Exchange? Here’s What You Can Do
Ways to utilise cash gifts:
Here are a few ideas on how you can utilise all of that cold, hard cash instead of just spending it mindlessly:
-
Sign up for a class:
If you’re someone who enjoys trying out new things all the time, you can use this money to sign up for a culinary class, take ballroom dance lessons or learn a new language. There’s much more to life than your job. Who knows, maybe some years later, one of these skills can come in handy as an alternate career option.
Additional reading: How To Make Your Big Fat Indian Wedding A Low-Cost Affair
-
Refund your wedding expenses:
Ease the burden on your parents by using the cash you received to pay off any outstanding vendor fees or refunding them for major wedding expenses that they had to bear. You can also put this money into their retirement fund.
-
Park it in your emergency fund:
If the amount received as cash gift is considerable, you may want to pool this money in your emergency fund or save it for a rainy day. Life immediately after marriage can be pretty hard on your finances with household expenses and essential bills eating into your income. It may not be possible for you to eke out money for emergency purposes every month, so this lump sum will come in handy.
Additional reading: 5 Simple Yet Effective Investment Options For Your Emergency Fund
-
Use it for your retirement fund:
Retirement may seem a long way off, but women as opposed to men have less number of active years and undergo more breaks in their careers. You must thus start planning for retirement early. Start by identifying the right assets that will meet your long-term financial goals. You can invest the cash you’ve received in long-term instruments like Public Provident Fund (PPF), Pension plan etc. You can even enjoy tax breaks on some of these investments.
Additional reading: Are You Saving Enough For Retirement? Find Out.
-
Use cash to make more cash:
As explained earlier, you can invest this money in a Mutual Fund scheme and make even more money. If this sounds unbelievable to you, welcome to the world of compounding where money is multiplied over a period of time. In layman terms, compounding is re-investing the interest earned and earning an additional interest on it.
How does it work?
You can park the cash gifts in a liquid Mutual Fund and seek the help of a financial planner on how to use the money. Investing the money temporarily in a liquid fund would help to avoid the trap of reckless spending. You can also just deposit the cash in your Savings Account and use it to up your contribution to an investment.
If you’re considering a long-term financial goal like retirement or child’s education, investing this money in Equity Mutual Funds is a great way to fund such goals. Equity has the potential to offer superior returns over a long period of time.
Additional reading: 10 Benefits Of Investing In Mutual Funds
Cash is a great liquid asset that can be used to multiply your money; use it wisely instead of splurging recklessly. Remember, empowerment truly starts with financial freedom.
You said:
So if you receive cash gifts amounting to Rs. 30,000, then you don’t have to pay any tax on it but if you receive Rs. 70,000, then that Rs. 20,000 excess of Rs. 50,000 will be subject to tax
Correct:
All 70000 is taxable.
Please verify.
Hi Ramachandra, Cash gifts that one receives up to Rs 50,000 are not taxable. But if you receive cash gifts amounting to Rs. 70,000, then only Rs. 20,000 (Rs. 70,000-50,000) will be subject to tax. Cheers, Team BankBazaar.