“Love is love. Taxes? Apparently, there’s still a need for more disclaimers regarding it.
India’s tax rules and regulations are under fire after a loophole related to same-sex relationships surfaced on social media. It all started with an Instagram post that stated while your relationship may be true, the Income Tax Act doesn’t agree.
Is this melodramatic? Yes, a bit. Is it fake? Hmm, sit down, we need to talk.
The controversy isn’t about a brand-new tax or the government suddenly deciding to charge people for falling in love. It revolves around the Income Tax Act’s provision that empowers married couples (only heterosexual couples btw) to get tax exemptions on gifts given to their spouses. And yes, you guessed it mate, same-sex couples can’t do that because under Indian law their marriages are not recognized.
And it all began with a… gold bracelet. Isn’t that quite a movie-like story? So, what is really going on here?
India doesn’t have the Gift Tax Act anymore. It was abolished long ago. In very simple terms, gifts can still be taxed in accordance with Section 56(2)(x) of the Income Tax Act, 1961.
Let’s break it down in an even simpler manner.
If a person who is not your “kinsman” gives you gifts in any form like money, gems, stocks, land, or any other item with a value of more than ₹50,000, the amount received can be subjected to taxes as “Income from Other Sources”.
But the good news is that there are exceptions. One of the most popular is your partner!
This would mean that when your partner gives you a car that costs about ₹20 lakh or a house that is worth ₹1 crore, the gift does not need to be taxed as the law values partners as “relatives”.
Perfect. Cost-effective. Tax-saving. Yay!
But what about same-sex partners?
The problem is that they do not have any tax benefits in that regard. Not because the Income Tax Act directly states “LGBTQ+ couples do not get any tax blessings.”
The logic behind it is simply that, as the Indian Constitution does not recognize same-sex marriages, any relationship in that category is not legally recognized.
The bracelet that led to a legal case
It’s hard to believe, but it all began because of a piece of family jewelry.
Are we all living in a KJO universe where every story has a “mere maa ka pushtaini kangan” lore attached to it?
Nevertheless, a aame-sex couple in Bengaluru found themselves in unexpected tax trouble after one of them presented their loved one with a golden bracelet from the family. They sought tax advice and were told that since they weren’t spouses, this item could be taxable.
Imagine inheriting your partner’s family jewelry and having the Income Tax Act come into play!
The couple decided not to let things slide and challenged the law in the Karnataka High Court.
There is another couple (with a similar plea) now trying to push for the same in the Bombay High Court.
Are they asking the court to allow same-sex marriage? Not at all!
That’s one of the biggest misunderstandings about their trial. The petitioners don’t want the courts to allow these marriages.
Instead, their argument is how Section 56(2)(x) should work in connection with same-sex marriages.
Their argument is quite clear. If heterosexual married couples are exempt from taxes as a result of their marital status, but their homosexual counterparts aren’t entitled to this exemption simply because such marriages are not recognized by the law, it is a case of discrimination.
The petitioners claim that this is a breach of Articles 14 and 15 of the Constitution. Basically, they say that the government cannot deprive them of a benefit that they cannot avail of.
HOT DAMN! Nice UNO reverse.
What does the government say?
The Income Tax Department is not denying the existence of same-sex unions. Rather, its argument is more technical.
The Income Tax Department says that the Income Tax Act only allows exemption to those who are spouses in the eyes of the law.
Since same-sex marriage is not recognized in India at present, those in same-sex marriages cannot be treated as spouses for tax purposes either. This must be through Parliament and not through the courts in accordance with the Department.
This matters more than taxes. This is where things get interesting.
According to lawyers, this is not a question of the bracelet or tax exemption alone. Marriage gives you a legal VIP pass. Once you are legally recognized as a couple, many laws come into effect, providing the couples with various opportunities regarding inheritance, pension, insurance, succession, employee benefits, medical decisions, gratuity and estate planning, etc.
Without legal recognition, many of these options are simply not available. This is why this case has become one of the most important discussions regarding LGBTQ+ equality since the Supreme Court decided not to recognize same-sex marriages in 2023. It is not only about taxes. It is about the consequences of having a legal system which relies on the idea of marital status that is not available to some couples.
Before Twitter begins to stream all caps messages…
It is necessary that one important disclosure be made. If your boyfriend gives you a watch for ₹5 lakh, this may be taxable too.
If your girlfriend gives you some lucrative shares, it may also be taxed. The point is that if a heterosexual couple is not married, it does not benefit from the exemption either.
However, the difference is that they have a legal opportunity to marry and qualify as spouses. Same-sex couples do not have these options currently. That’s the constitutional question at the heart of these petitions.
Toodlesss.