Tax on Gifts in India

Gifts are often given as a gesture of love, goodwill, or celebration. However, it is essential to understand the tax implications of such transactions in India. The Government of India first introduced the Gift Tax Act in April 1958, later abolished it in 1998, and reintroduced it in a revised form in 2004. Read on to learn more about the current gift tax rules in India.

  Here is the list of gifts that is taxable as the Income Tax Act 1961 under Section 56(2)(x):  

1. Immovable property, such as building and land
2. Money given in cheque or cash
3. Movable property, such as drawings, jewellery, share, etc.

Taxation on Gifts

In India, as per the Section 56 of the Income Tax Act, gifts received by anyone are taxed under the header ‘Income from Other Sources’. The below listed are the gifts which are taxed:

1. Any amount of money without consideration above Rs. 5,000 will be taxed.

1. Any immovable land or property without consideration, having a stamp duty value above Rs.50,000, will be taxed as per the stamp duty value of the property.

1.  Any immovable land or property with inadequate consideration, having a stamp duty value exceeding consideration by Rs.50,000, will be taxed. In this case, taxation will be on stamp duty value minus consideration.

1. Example: Consider a property having stamp duty value of Rs.2 lakh and a consideration of Rs.75,000. In this case, the taxable amount will be Rs.1.25 lakh.

1. Any property, like jewellery, shares, apart from immovable property without consideration will be taxed at ‘Fair Market Value’ exceeding Rs. 50,000. In this case, the quantum of taxation will be on ‘Fair Market Value’ of such property.

1. Any property apart from immovable property with consideration, having ‘Fair Market Value’ exceeding consideration by Rs.50,000. In this case, the quantum of tax will be on ‘Fair Market Value’ minus consideration.

Exemptions on Gift Tax

Under Indian income tax law, not all gifts are taxable. While gifts exceeding ₹50,000 in value are generally taxed, several specific exemptions are provided depending on the nature of the gift, the relationship between the donor and recipient, and the occasion on which the gift is given.

1. General Gift Tax Exemption Limit

Gifts received by an individual from any person are exempt from tax up to ₹50,000 in a financial year. If the total value of gifts from non-relatives exceeds this threshold, the entire amount becomes taxable as "Income from Other Sources".

2. Gifts from Relatives (Fully Exempt Regardless of Value)

Gifts received from specific relatives are completely exempt from tax, even if the value exceeds ₹50,000. For tax purposes, the term ‘relative’ includes:

1. Spouse
2. Brother or sister of the individual
3. Brother or sister of the spouse
4. Brother or sister of either parent
5. Any lineal ascendant or descendant of the individual or spouse
6. Spouse of any of the above persons

3. Gifts on Special Occasions (Fully Exempt)

Gifts received on the following occasions are fully exempt:

1. Wedding of the individual (not applicable to anniversaries or birthdays)
2. Inheritance or gifts received under a will
3. Gifts due to the death of the donor (bequeathed or voluntarily transferred)

4. Exemption on Personal Gifts (Irrespective of Value)

Certain personal gifts are not taxed even if they exceed ₹50,000 in value. These include:

1. Movable property or personal belongings gifted without consideration (e.g., jewelry, electronics, furniture), depending on circumstances
2. Assets received under partition of Hindu Undivided Family (HUF)

5. Gifts Received from Exempt Institutions

Gifts or transfers received from the following entities are not taxable:

6. Gift-Like Transfers Also Subject to Tax

Certain transfers that are not explicitly labeled as “gifts” may still attract gift tax if:

1. The transfer involves movable or immovable property,
2. It is made without adequate consideration,
3. And it exceeds the threshold of ₹50,000 in fair market value.

Such transactions may be considered deemed gifts and taxed accordingly.

Final Summary Table

Taxable Value of a Gift

Here is the list of taxable value of various monetary and non-monetary presents:

Provisions Relating to Stamp Duty

The provisions as per Section 50C of the Income Tax Act 1961 are similar to the provisions relating to Stamp Duty.  Here is the list of provisions relating to Stamp Duty:

1. Stamp duty value is vital for the purpose of computing gift tax in case of immovable property and the value of stamp duty can be higher depending on various reasons, such as:

1. Payment done in full or parts through account payee cheque, bank draft, or electronic mode of transfer through bank account on or before the date of agreement for transfer.

1. In case date of such agreement and the date of registration.

1. As per Section 50C, in case a taxpayer has disputed the stamp duty value adopted by stamp duty valuation authority or questioned the stamp duty value, then the tax officer is required to refer the valuation to a valuation officer (VO).
2. The VO will check the records and will provide an explanation to the taxpayer in writing.