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How are Gifts Taxed? - Gift Tax Exemption Relatives List

Updated on: Mar 1st, 2023


8 min read

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A "gift" might be money or movable/immovable property that an individual receives from another individual or organisation without making a payment, according to the Income Tax Act definition. In legal terminology, the person or organisation providing the gift is designated the donor while the gift receiver is known as donee.

However, many a time gifts can also be a part of tax planning/tax evasion. While tax planning done within the framework of law is permissible, tax evasion is prohibited and can be penalised. 

The Government introduced a gift tax in April 1958 regulated by Gift Tax Act, 1958 (GTA) with an objective to impose taxes on giving and receiving gifts under certain specific circumstances. Gifts in the form of cash, demand draft, bank cheques, or anything having value were covered. 

However, the GTA was abolished in October 1998 and made all gifts tax-free. But, GTA was reintroduced in a new form and included in the income tax provisions in 2004. It is highly important to have a basic understanding of taxation on gifts in India to avoid any ignorant/unplanned tax outflow.

Gift taxation in India

As per the law, as it stands today which was amended in 2017, gifts received by any person by any person or persons are taxed in the hands of the recipient under the head ‘Income from other sources’ at normal tax rates. We have discussed below what kind of gifts are covered and their quantum to be taxed.

gift tax

The provisions relating to gift tax have been dealt with under Section 56(2)(x) of the Income Tax Act, 1961. These provisions have been briefly captured in the form of the table below:

Kind of gift coveredMonetary thresholdQuantum taxable
Any sum of money without considerationSum > 50,000Entire sum of money received
Any immovable property such as land, building, etc. without considerationStamp duty value* > Rs 50,000Stamp duty value of the property
Any immovable property for inadequate considerationStamp duty value* exceeds consideration by > Rs 50,000Stamp duty value Minus consideration 
Example 1:Stamp duty value Rs 2,00,000 Consideration Rs 75,000. The taxable amount is Rs 1.25 lakh (stamp duty value exceeds consideration by > Rs 50,000)  
Example 2 In Example 1, if consideration  is Rs 1,60,000, the taxable gift is Nil as stamp duty value does not exceed consideration by > Rs 50,000
Any property (jewellery, shares, drawings, etc.) other than an immovable property without considerationFair market value *(FMV) > Rs 50,000FMV of such property
Any property other than immovable property for a considerationFMV exceeds consideration by > Rs 50,000FMV Minus consideration (Same example in case of immovable property can be referred)

*Value adopted by stamp duty authority for the purpose of stamp duty

Provisions relating to Stamp Duty

Provisions relating to considering the stamp duty value is similar to the provisions as per Section 50C.  Let us discuss the provision for the purpose of gift tax in brief below:

  • For the purpose of computing gift tax in case of immovable property, stamp duty value is what needs to be considered. However, stamp duty value can be higher due to varied reasons and one of such reasons can be a considerable time gap between agreement fixing the consideration and date of registration. Therefore, for the purpose of gift tax, stamp duty value as on the date of agreement fixing the consideration need to be considered if the following conditions are satisfied:
    • Date of such agreement and the date of registration are different; and
    • Consideration either fully or in part is paid by way of an account payee cheque or bank draft or by using an electronic mode of transfer through bank account on or before the date of agreement for transfer
  • Further, in case the taxpayer has questioned or disputed the stamp duty value adopted by stamp duty valuation authority as per Section 50C, the tax officer is required to refer the valuation to a valuation officer (VO) and the VO is required to call for records and give an opportunity of being heard to the taxpayer and pass an order in writing of value he has arrived. For the purpose of gift tax, a lower stamp duty value or value arrived by VO is required to be adopted.

Exemptions from gift tax

As mentioned above, certain specified gifts received by any person from any person(s) attract gift tax. However, here are some exceptions to this.

Category of donee (recipient of gift)Category of donorOccasion covered
Individual (It may be relevant to note here that while a gift from a defined relative is not taxable for the donee, income from such gifts may in some cases taxable in the hands of the donor itself – For example, clubbing provisions, deemed owner concept in the house property, etc)Relative – spouse, brother and sister of self and spouse, brother or sister of parents or parents-in-law, any lineal ascendant or descendant of self or spouse, spouse of any of the relatives mentioned here.NA
IndividualAny personMarriage of Individual
Any personAny personUnder a will or by way of inheritance
Any personIndividualIn contemplation of death of donor or payer
Any personLocal authority – Panchayat, Municipality, Municipal Committee and District Board, Cantonment BoardNA
Any personfrom any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to Section 10(23C)NA
Any personAny charitable or religious trust registered under section 12A or section 12AANA
Any fund or trust or institution or any university or other educational institution or any hospital or other medical institution established for charitable/religious/educational /philanthropic purpose and approved by the prescribed authority. [Refer Section 10(23C) (iv) (v) (vi) and (via)]Any personNA
Members of HUFHUFAny distribution of capital assets on total or partial partition of a HUF
Trust created or established solely for the benefit of the relative of the IndividualIndividualNA

General caution: Due to extensive tax planning using gifts, gifts in India generally fall under the scrutiny of the tax department, especially if the quantum is huge. Hence, it may be advisable to maintain documentation to establish the genuineness of the gift received and sufficient source of funds with the donor to justify the gift.  

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