tdsmaster.com
Home Investment Master NRI Master Glossary Contact us
Taxability of Gifts - Applicable Rules

Gifts are one of the most discussed topics and it becomes more interesting when gifts are of a large sum/kind. One of the very important issues while receiving or giving gifts arises as regards to its taxbility. Let us understand various aspects of Gifts received in cash as well as in kind under Indian Income Tax.

Gifts are the property or sum of money received without consideration or for part consideration. Section 56(2) of the Income Tax Act contains the provisions regarding property or sum of money received without consideration and known as gifts.

image gifts


  • Gifts received from a relative are not taxable at all-
Here term relative is very important and defined to include the following relatives of an individual:
  1. spouse of an individual i.e. husband/wife,
  1. brother or sister of an individual,  
  1. brother or sister of spouse of individual(i.e. wife's brother/sister or husband's brother/sister),
  1. brother or sister of either of the parents of the individual(i.e. father's brother or sister, mother's brother or sister),
  1. any lineal ascendant of the individual (i.e. parents, grand parents, great grand parents....)
  1. any lineal descendant of the individual (i.e. children, grand children....)
  1. any lineal ascendant or descendant of the spouse of individual (i.e. parents, grand parents, great grand parents of spouse....)
  1. spouse of the persons from 2 to 7 above
We can see the definition of relatives includes all the major relationships of an individual and gifts received from any of them is fully exempt from tax.

  • Gifts received on following occassions are also not taxable:
  1. Gifts received on the occassion of marriage of the individual - A nice relaxation to the the people getting married is that gifts received at the time of marriage are fully exempt and there is no monetary limit to this. But one must remember that gifts received on marriage anniversary, engagements etc. are not covered under this rule and are therefore taxable as income from other sources subject to the applicable limits.
  1. Gifts received under a will or by way of inheritance- One more explicit category of gifts which is not taxable under Income Tax are gifts received under a will/ inheritance. 



  • Gifts received from a person other than a relative and on occassion other than marriage are not taxable upto a total of Rs. 50000/-
Gifts in an year from a person other than relative and on occassion other than marriage exceeding Rs. 50000/- are taxable as income from other sources. If gifts falling in this category for a particular year exceed Rs. 50000/- the total amount of gifts will become the income and will be taxable. For example lets take a case of Mr. X for the year 2012-13:
  • Mr. X received a cash gift Rs. 35000 from his friend Mr. Y - here Rs. 35000 being less than 50000 will be exempt from tax;
  • Now Mr. X receives another gift from Mr. Z of Rs. 18000 - Now the total amount of gifts received by Mr. X from unrelated persons is Rs. 53000 which is more than the limit of 50000, Mr. X is required to pay tax on entire Rs. 53000 as his income from other sources.
In a nut shell, gifts from non relatives are exempt but only upto Rs. 50000, if gifts from non relatives exceed Rs. 50000 the total amount of gifts received in the year from non relatives will be taxable.


We can sum up that following gifts are not taxable at all:
  1. Gifts received from any one at the time of marriage are not taxable.
  1. Gifts received from the near relatives are not taxable. (Term relative should be understood clearly)
  1. Gifts received from non relatives upto Rs. 50000 are not taxable.
  1. Gifts received under WILL or inherited are not taxable.
Gifts in Kind:

Rules for taxability of gifts in kind (gifts in the form of House Property, Car, Jewellery, Shares etc.) are applicable on the basis of the value of such gifts. The important part to arrive at in case of gifts in kind is to understand and calculate the value of such gifts received in kind.

Valuation of Immovable Property:
  1. Where gift ie. property is received without consideration and the Stamp Duty Value of the property exceeds Rs. 50000; Stamp Duty Value shall be considered.
  1. Where gift ie. property is received for consideration and considertion is less than the stamp duty value of the property by Rs. 50000, Satmp duty value reduced by the amount of consideration will be considered.
Valuation of Property other than immovable property:
  1. Where gift is received without consideration and the Aggregate Fair Market Value of the property exceeds Rs. 50000; Aggregate Fair Market Value shall be considered.
  1. Where gift is received for consideration and considertion is less than the Aggregate Fair Market Value of the property by Rs. 50000, Aggregate Fair Market Value reduced by the amount of consideration will be considered.

Want to ask about taxability of your gifts, write to us at arpita@tdsmaster.com or through Contact us






Income of a Minor Child- How taxed?







content and images copyright @tdsmaster.com, 2011-2020