Received a Big Gift? Here’s What You Should Know About Gift Tax Rules in India

Under Section 56(2)(x) of the Income Tax Act, certain gifts can become taxable if their total value exceeds ₹50,000 in a financial year. This rule applies when gifts are received without any payment in return.

The types of gifts that may attract tax include:

• Cash or bank transfers: Any money received as a gift, whether in cash or through bank transactions, may be taxable.
   
• Immovable property: Land, a flat, or any other real estate received for free or at a significant discount may be taxed based on the stamp duty value.
   
• Movable property: Gifts such as jewellery, paintings, shares, mutual funds, or even crypto assets may be taxed if received free or at less than fair market value.

In such cases, the entire value of the gift is considered “Income from Other Sources” and must be disclosed in your Income Tax Return (ITR).

What Are the Exemptions?

Not all gifts are taxable. The law provides some important exemptions, especially when the gift is from certain close family members.

Here are the major exemptions:

• Gifts from relatives: These are completely exempt. Relatives include your spouse, parents, siblings, children, and their spouses. However, friends and distant relatives do not qualify under this category.
   
• Gifts received on marriage: Gifts of any amount received on the occasion of your wedding are fully exempt from tax.
   
• Gifts through inheritance or will: Property or money received under a will or through inheritance is not taxable.
   
• Gifts in contemplation of death: These are also exempt.

It is considered good practice to report even exempt gifts in the “Exempt Income” section (Schedule EI) of your ITR to maintain full transparency and avoid future queries.

Read More: Received ₹7.5 Crore Property as Gift From Sister: Do You Need To Pay Tax?. 

When Does a Gift Become Taxable?

The threshold for taxation is ₹50,000. If the total value of gifts received without any consideration in a year exceeds this amount, the entire amount becomes taxable, not just the portion above ₹50,000.

For example, if you receive gifts worth ₹70,000 during the year (none of which fall under exemptions), then the full ₹70,000 becomes taxable as income.

Tips to File Gifts Correctly in Your ITR

If you receive a significant gift, here are some practical steps to ensure your ITR is accurate:

• Maintain proper documentation:
   
  • Note the nature and value of each gift
     
  • Record the date of receipt
     
  • Mention the name and relationship of the donor
     
  • Keep supporting evidence like gift deeds or bank statements
     
• Stamp duty value matters: In the case of immovable property, the stamp duty valuation becomes crucial. If you receive a flat or land as a gift, this value is used to assess taxability.

What Happens If You Do Not Report Gifts?

Failing to disclose taxable gifts in your ITR can lead to serious consequences.

With advancements in technology, the Income Tax Department now uses AI-based analytics and tools like the Annual Information Statement (AIS) to track large transactions. A sudden spike in bank balance or receipt of valuable assets can easily be flagged.

Consequences may include:

• Notices from the department
   
• Demand for additional tax
   
• Interest and penalties for concealment of income

Conclusion

If you have received a significant gift—be it cash, property, or digital assets—during the financial year, take time to review whether it qualifies as taxable. Even if the gift is exempt, recording it under the correct section adds to your credibility as a taxpayer.

In short, while gifts are a reason to celebrate, it is equally important to be cautious about how they are treated under the tax laws. Transparency and proper documentation go a long way in keeping things hassle-free.
 

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.