Tax on gifts in India falls under the purview of the Income Tax Act as there is no specific gift tax in India after the Gift Tax Act, 1958 was repealed in 1998. Gifts up to Rs. 50,000 per annum are exempt from tax in India. In addition, gifts from certain relatives such as parents, spouse and siblings are also exempt from tax. Gifts in other cases are taxable. Let us know more about gifts and income tax applicable on gifts in India.
What is a Gift as per the Income Tax Act
According to the Income Tax Act, money or movable/immovable property that an individual receives from another individual/organization without making a payment is termed as “gift”.
Thus, from the taxation point of view, gifts can be classified as:
- Monetary gift or money received in the form of cash, cheque, draft, bank transfer, etc.
- Movable property such as shares, bonds, jewellry, sculptures, paintings, etc. This also includes movable properties received at reduced price/less than its fair market value.
- Immovable property like building, land, residential/commercial property. This also includes immovable properties acquired at reduced price/less than its stamp duty value.
Gifts Exempted from Tax
1) Gifts or cash of up to Rs. 50,000 in a financial year are exempt from tax. However, if you receive gifts higher than this amount, the entire gift becomes taxable. For instance, if you receive Rs. 75,000 as a gift from your friend, the entire amount of Rs. 75,000 would be added to your income and taxed at your slab rate. It would be considered “Income from Other Sources”. Here, the total value of all gifts received is counted. In another instance, in case you receive Rs. 50,000 from one friend as a gift and Rs. 25,000 from another friend, the limit of Rs. 50,000 would be considered to be breached. The entire gift value (Rs. 75,000) would be taxable in your hands.
2) If you receive any property (movable or immovable) for inadequate consideration, the difference between the consideration and the stamp duty value would be considered a taxable gift. For example, if you are given a flat worth Rs. 50 Lakh (according to circle rates/ready reckoner rates for stamp duty) and you pay only Rs. 30 Lakh, then the excess Rs. 20 Lakh would be considered a taxable gift. Note that if the difference between the actual value and stamp duty value is less than Rs. 50,000, the transfer will not be considered a taxable gift.
3) Gifts from specified relatives are exempted, regardless of the amount received. These relatives are spouse, father, mother, brother and sister. They also include any lineal ascendant or descendant of the individual or his spouse as well as brother/sister of the spouse. However, note that even though the gift itself is exempt in the hands of the recipient, the income generated from the gift from relative may be taxable under the clubbing of income provisions of the Income Tax Act. For example, if Mr. A gifts Rs. 10 Lakh to his wife, the same would not be added to the income of his wife. However, if his wife creates an FD from the same and earns interest, the interest would be added to the income of the husband.
4) Gifts given in contemplation of marriage of the recipient.
5) Gifts given in contemplation of the death of the donor and gifts given under a will or inheritance.
6) Property received from a local authority as defined under section 10(20) of the Income-tax Act.
7) Property received from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in section 10(23C).
8) Property received from a trust or institution registered under section 12AA.
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How to Calculate the Taxable Value of a Gift
To know the amount of tax that you need to pay when you receive a gift, the Income Tax Act includes provisions to compute the taxable value of presents. The following table shows how the taxable value of different types of monetary and non-monetary presents is calculated:
| Type of Gift | Gift Tax Applicability | Taxable Value of Gift |
| Cheque, cash or bank transfer | If the value of the gift is more than Rs. 50,000 | The entire amount of money received as gift |
| Immovable property like building, land, etc. received without consideration (without making any payment) | If stamp duty value of the gift is more than Rs. 50,000 | Stamp duty value of the property received as a gift |
| Immovable property for inadequate consideration (that is, property bought at a price lower than the stamp duty value of the property) | If stamp duty value of the gifted immovable property exceeds the purchase price by more than Rs. 50,000 | The difference between the stamp duty value and the purchase price of gifted property is taxable.
For instance: If the stamp duty value is Rs. 30 Lakh and the purchase price is Rs. 20 Lakh, the taxable amount is Rs. 10 Lakh (Rs. 30 Lakh – Rs. 20 Lakh)
|
| Assets like shares, jewelry, paintings, sculptures, etc. without consideration (without making any payment) | If the fair market value of the gift is Rs. 50,000 | Fair market value of the gift
|
| Assets like shares, jewelry, paintings, sculptures, etc. for consideration (that is, purchased by the donor before being gifted) | In case the fair market value of the gift exceeds the purchase price by more than Rs. 50,000 | The difference between the fair market value and the purchase price of the present is taxable.
For instance: If the fair market value of jewelry given as gift is Rs. 2 Lakh and the original purchase price is Rs. 1 Lakh, the taxable amount is Rs. 1 Lakh (Rs. 2 Lakh – 1 Lakh) |
How to Declare Tax on Gifts in India
As per the current Income Tax rules, gift taxation is a form of direct tax, that the receiver of the gift needs to declare and make appropriate tax payments.
To know the tax payable, the value of the gift needs to be declared by the receiver when filing the ITR under the head “Income from Other Sources”. The taxable value of the gift becomes part of the income of the receiver for the financial year. Then the gift tax liability is computed according to the income tax slab rate applicable to the receiver.
Also Read: How to File Income Tax Return Online for FY 24-25/AY 25-26
Tax on Gifts Received from Friends
Monetary and non-monetary gifts received from friends will be charged to tax (provided the above criteria of taxing gift are satisfied) since friends are not considered ‘relatives’ for this purpose.
It is worth noting that if the total amount of gifts received throughout the year is less than Rs. 50,000, no tax is applicable.
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Tax on Gifts Received from Relatives
Gifts, both monetary and non-monetary, received from the below-mentioned relatives are exempt from tax regardless of their amount/value.
The Income Tax Department has specifically categorised relatives from whom accepting gifts don’t attract any income tax whatsoever. Relatives for the purpose of gift tax or tax on gifts include:
- Spouse of the individual
- Sister/brother of the individual and their spouse
- Sister/brother of the spouse of the individual
- Sister/brother of either of the parents of the individual
- Any lineal ascendant/descendent of the individual
- Any lineal ascendant/descendent of the spouse of the individual or their spouse
- In case of HUF or Hindu Undivided Family, any member thereof
Tax on Gifts Received in Marriage
Gifts received by an individual on the occasion of marriage are not charged to tax. However, marriage is the only occasion when gifts, both monetary and non-monetary, are not charged to tax. Gifts received on occasions like anniversary, birthday, etc. will be subjected to tax.
FAQs
Q. Are gifts in cash and kind, both taxable?
Ans. Yes, all kinds of gifts including cash, gold, real estate, paintings or any other valuable item are taxable. However, if the cash amount or value of the gift in kind is less than Rs. 50,000, the same would not be taxable.
Q. Are gifts received by a minor subject to taxation?
Ans. Yes, gifts received by a minor will be taken into account and clubbed with the income of any one of the parents (in case both parents are earning taxable income), that is, whoever is earning the highest income.
Q. Are monetary gifts received from abroad taxable?
Ans. Yes, in case the total received amount or gift received during the year by an individual/HUF exceeds Rs. 50,000, it is liable to be taxed under the Income Tax Act.
Q. What is the rate of gift tax in India/gift tax rate in India?
Ans. The taxable value of the present is included in the income of the receiver for the financial year. Then the gift tax liability is calculated as per the income tax slab rate applicable to the receiver.
Q. Is gift from father to son taxable in India?
Ans. No, gift from father to son, irrespective of the amount received/value is exempted from tax as there is a gift tax exemption in blood relation.
Q. Will gifts or money received on birthday or anniversary be also attract income tax?
Ans. Yes, gifts received on occasions apart from marriage attract income tax as per the applicable slab rate, provided the criteria of taxing gift(s) is satisfied.
Q. Will I have to pay tax even if the property gifted to me is situated abroad?
Ans. Yes, gift of immovable property will be charged to tax whether the property is located in India or abroad, provided the other conditions regarding the taxability of gift of immovable property are satisfied.
Q. What is the meaning of the term “family” in case of gifts in India?
Ans. In case of gifts in India, “family”, in relation to an individual, includes the spouse and children of the individual, his parents, brothers and sisters or any of them, mainly or completely dependent on the individual.