ITR Filing FY25: Is Money Transfer from Father to Son in the Form of a Gift Taxable in India?

In India, gifts are commonly understood as money or movable/immovable property received from another individual or organisation without any payment in return. The person providing the gift is known as the donor, while the recipient is referred to as the donee. 

The Income-tax Act, 1961, defines the rules governing the taxation of gifts. Gifts, while often used for personal reasons, can sometimes be used as part of tax planning. While tax planning within the law is permissible, tax evasion, on the other hand, is a punishable offence.

Understanding how money transfers, specifically from father to son, are taxed can help in proper tax planning and avoid legal pitfalls.

Money Transfer from Father to Son: Is It Taxable?

A money transfer from father to son, when considered as a gift, falls under the exemption category provided the father and son are related as defined under the Income Tax Act. According to the Act, gifts received from a direct lineal ascendant (like a father) are not taxable. Therefore, a father transferring money to his son as a gift will not be subject to gift tax under Indian tax law. However, there are important caveats to be aware of:

• The transaction must be presented as a gift, not a loan or payment for services.
   
• The amount transferred must be classified as a gift, with no formal repayment terms or interest involved.

What Is Gift Tax in India?

According to Section 56 of the Income-tax Act, 1961, any gift received by an individual or a group of individuals is subject to tax under the head ‘Income from Other Sources’ at normal tax rates. This means that if you receive a gift above a certain value, it will be taxed as part of your income. However, not all gifts are taxable under this section.

Gift taxation applies to both tangible and intangible properties, including money, jewellery, and even property. It’s important to note that not all gifts are automatically subject to tax. The key question is whether the gift falls under taxable categories or if any exemptions apply.

Read More: ITR Filing AY 2025–26: CBDT Introduces New Updated ITR-6 Form for Domestic and Foreign Companies.

Exemptions from Gift Tax

While the Income-tax Act includes provisions for taxing gifts, there are notable exemptions. Some gifts are exempt from taxation based on the nature of the relationship between the donor and the donee.

Gifts from Relatives

The most significant exemption comes into play when the gift is received from a relative. Gifts received from defined relatives are not taxable in the hands of the recipient. The following categories of relatives are exempt:

• Spouse
   
• Brother and sister of self and spouse
   
• Parents or parents-in-law
   
• Any lineal ascendant or descendant of the self or spouse
   
• Spouse of any of the relatives mentioned above

It’s important to note that while gifts from a relative are not taxable for the donee, income generated from these gifts, in some cases, may be taxable in the hands of the donor. For example, provisions like clubbing of income and the concept of deemed ownership for house property may apply, leading to tax implications for the donor.

Gifts on Specific Occasions

Apart from gifts from relatives, the law also provides exemptions for certain types of gifts received during special occasions, such as weddings or inheritance. These gifts do not attract gift tax, regardless of their monetary value.

Conclusion

To sum up, a money transfer from father to son in the form of a gift is not taxable in India, provided it meets the criteria set out in the Income-tax Act. Gifts received from close relatives, such as parents, are exempt from taxation under the provisions of the Act. However, while the gift itself may be tax-exempt, any income generated from that gift may still attract tax under certain circumstances, depending on how the funds are utilised.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.