Short answer: Gifts received from relatives are generally not taxable in India. However, the definition of “relative” is narrower than many people assume, and there are several other important rules and exceptions worth understanding in the context of gifts in general.
What happens when someone gives you a gift? Are cash gifts taxable? What about gifts in kind? I got an inheritance – will I have to pay tax on it? These are all questions we tend to ask, either by ourselves or when we come across some reference to these. Let’s figure out the implications.
When are gifts taxable?
Gifts in India are taxable because the Income Tax Act[1] specifically mandates that a gift received, i.e., as a sum of money or in the nature of property, exceeding INR 50,000 in value is taxable as Income From Other Sources. There are of course exceptions to this provision[2]. The first exception is gifts of value below INR 50,000. This limit of INR 50,000 applies to all gifts received by a single person in aggregate for a particular tax year. For instance, if you receive a sum of INR 10,000 each from five of your friends in a tax year, you haven’t “exceeded” the limit and so these aren’t taxable. However, if you receive a gift of even INR 100 from a sixth friend in the same tax year, the entirety of your gifts that year totaling to INR 50,100 is taxable as income from other sources.
Relatives and gifts
Another such exception is for gifts received from a “relative”[3]. But hold on, not everyone you consider a relative is covered. The Income Tax law also lists down the persons considered a relative for excluding gifts from such a person from taxable income. If you are an individual, broadly, the law covers your spouse, siblings, parents, grandparents, children and grandchildren and certain uncles and aunts, corresponding relatives of your spouse, and the spouses of many of these relatives.
Who exactly qualifies as a relative?
For an individual, “relative” means:
- Your spouse
- Your siblings
- Your spouse’s siblings
- The siblings of your parents or your spouse’s parents
- Any lineal ascendent or descendant in your case – examples include maternal / paternal grandparents, great grandparents, children, grandchildren and so on
- Any lineal ascendent or descendant of your spouse; and
- Spouses of all the above persons from point 2 onwards.
Essentially, if you receive a gift of any value from any of the above persons whom the Income Tax Act recognizes as your relatives, there will be no tax implications.
Other important exceptions
Some of the other gifts excluded from tax are:
Gifts received on the occasion of marriage
The Income Tax Act specifically excludes gifts received “on the occasion of marriage”. The gifts can be received from anyone (not restricted to relatives). However, it is important to substantiate that the gifts were received on the occasion of marriage. Suggested documentation includes marriage invitation cards, registration certificate, a list of all gifts received along with details of the person giving the gift, mode of receipt, date and amounts. Some writers hold that only the gifts received on the actual date of the marriage qualify for this exception. However, Indian weddings are often spread over multiple days with multiple rituals. In my view, as long as a clear nexus can be established between the gift received and the occasion of marriage, gifts received on any of the ritual days or the days preceding / succeeding the wedding should qualify for the exception.
It may be noted that the Income Tax Act only covers the occasion of marriage. So if you receive gifts on any other occasion such as a birthday or a house warming ceremony or any other occasion, ritualistic or otherwise, if the gifts are from non-relatives and exceed INR 50,000, they need to be reported as taxable income and taxes discharged on such gifts.
Money/property received under a will or by way of inheritance
Again, this exception does not specify “relative”. Any inheritance received from anyone is free from tax in India, as long as the matter of inheritance can be established clearly. Maintaining records such as a copy of the will (if there is one) or written communication from the executor along with a record of the monetary / property transfer transactions will be helpful here.
Deathbed gifts
The Income tax Act also excludes any money/property received from a person contemplating their death, from the ambit of taxable gifts / income. If someone very ill and expecting to die of that illness distributes some of their assets or effects as gifts to favoured individuals, such gifts are not taxable. However, an interesting point to note here is what the law covering such gifts themselves says[4] – if the gift giver / donor recovers from their illness and does not actually die, such a gift given “in contemplation of death” becomes invalid. The property under such a gift reverts to the gift giver / donor since the specific circumstance of the gift no longer exists. Did you know about this?
Practical considerations
It isn’t enough to just know the exceptions. The onus of proving that a certain sum of money or any property received by you during a tax year falls within an exception is also on the taxpayer. Let’s look at some practical considerations on managing and substantiating gifts:
- Does every gift need to be documented via a gift deed?: Gift deeds are generally useful to document gifts of large sums of money. There is no monetary threshold mandating a gift deed for such gifts; however, it would be prudent to document gifts running into lakhs or higher amounts via a gift deed. In addition, the laws governing transfer of property in India[5] require that gifts of immovable property are made through duly registered gift deeds. In case of monetary gifts, even if there is no gift deed, making the gift via bank transfer or other non-cash modes is helpful in establishing the transaction trail.
- Do non-taxable gifts need to still be reported in the ITR?: Short answer – No. For details, check out Do non-taxable gifts / capital receipts need to be reported in the ITR?
Key Takeaways
- Gifts from relatives (if covered under the tax law are not taxable)
- Gifts from non-relatives are taxable if the total gifts received during a tax year exceed INR 50,000
- Gifts received on other specific occasions or circumstances such as marriage, inheritance bequests or deathbed distributions are also excluded from the tax ambit
- The key to substantiating non-taxability of excluded gifts is to maintain detailed documentation and transaction trails
Legal References
[1] Section 92(2)(m) of the Income Tax Act, 2025 specifically covers the taxability of gifts of value exceeding INR 50,000.
[2] Section 92(3) of the Income Tax Act, 2025 provides the exceptions to gift taxation
[3] “Relative” for this purpose is defined under section 92(5)(g) of the Income Tax Act, 2025
[4] Refer to section 191 of the Indian Succession Act, 1925
[5] Section 123 of the Transfer of Property Act, 1882 holds that gifts of immovable property are invalid unless they are made through a written document, i.e., a gift deed. The Registration Act, 1908 (section 17) requires that such gift deeds for immovable property be mandatorily registered with the Sub-Registrar. The Indian Stamp Act, 1899 read with the local stamp Acts of the respective States mandates the payment of stamp duty at applicable rates on the transfer of immovable property via gift deeds.