Guide on Income Tax on Gift Received in India – [2024]

Income Tax on Gift Received in India: Rules & Exemption

Dear reader here is a quick guide on – Income tax on gifts received. We all love to give and receive gifts from our friends, colleagues, and relatives. In India giving gifts is customary. It is seen as a sign of friendship, and closeness. We receive a lot of gifts from our family friends, relatives, and office colleagues on various occasions or festivals.

But, do you know that receiving a gift can make you liable to pay tax? Many of us are not aware of the provisions of gift tax. In India, gifts are generally not subject to a separate gift tax. Instead, they are taxed under the income tax provisions.

In this article, we will discuss all about Gift Tax in India, its rules and exemptions.

Dear Reader, although the Gift Tax Act, of 1958 has been abolished, however, there are certain provisions in the Income Tax Act, which make the gift taxable in the hands of the recipient.

As per the provisions of section 56(2) of the Income Tax Act, 1961, any gifts (in cash or kind) received by an individual or HUF (Hindu Undivided Family) over Rs. 50,000/- in a year would be taxable.

Who is liable to pay gift Tax?

The person receiving gifts will be liable to pay gift tax. Such income would be taxable in the year in which received and taxable under the head “Income from other sources”.

To have better clarity, let’s see what is Gift or what constitutes a gift to fall under the ambit of gift tax.

What does Gift mean in the Income Tax Act?

“Gift” means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money’s worth.

Thus, income tax authority considers:

• Monetary gifts given in cash/cheque/demand draft,

• Moveable property such as jewellery, gold bars, paintings, drawings or sculptures,

• Immovable property such as land or building or both, as gifts.

​Are gifts of immovable property received by an individual or HUF charged to tax?

​​​Gift of immovable property received by an individual or HUF will be charged to tax, if:

• Immovable property (land or building or both) is received by an individual/HUF,
• received without consideration (i.e., received as a gift)
• The stamp duty value of such immovable property received exceeds Rs. 50,000

 

Exemptions from levy of Income Tax on Gifts

Now, we know that the monetary value of any gift (cash or kind) above Rs.50000, received without consideration by an individual or HUF from any person is chargeable to tax as income under head income from other sources subject to some exemptions.

That means, there are cases when you are exempt from tax.

When are gifts exempt from tax?

There are cases or situations where gifts received are not chargeable to tax as income. In the following cases, you are exempt from tax:

Gift received:

• from relatives** (See below).

• by a HUF from its members.

• on the occasion of the marriage

• under will/ by way of inheritance.

• Gift received in contemplation of death of the payer or donor.

• Received from a local authority

• Received from any fund/foundation/university/other educational institution/hospital or other medical institution, any trust or institution referred to in Section 10(23C).

• Money received from a trust or institution registered under section 12AA.

**Relatives Meaning for Gift Taxability

Relatives for this purpose means:

(a) Spouse of the individual;

(b) Siblings (Brother or sister) and their spouses of the individual;

(c) Siblings of the spouse of the individual;

(d) Siblings of the parents of the individual;

(e) Any lineal ascendant or descendant of the individual;

(f) Any lineal ascendant or descendant of the spouse of the individual;

Key Points on – Income Tax on Gifts Received

Here, I am jotting down key points of the provisions of Income Tax on Gifts received. This is just for your reference.

• any gift (cash or kind) above Rs.50000, received without consideration by an individual or HUF from any person* is chargeable to tax

• Gift includes any gift, “cash or kind” or “movable or immovable property,

• Chargeable to tax under the head “income from other sources”,

• Chargeable to tax in the hand of the recipient

• Gift of immovable property received without consideration by an individual or HUF will be charged to tax if the stamp duty value of such immovable property exceeds Rs. 50,000

• Gift received on the occasion of the marriage is exempt from tax

• Gifts received from relatives exempt from tax