Gift Tax in India Explained: Exemptions and Tax Rules

In India, gifts are taxable only in specific situations under the Income Tax Act, 1961. While many gifts are fully exempt, certain cash, property, or asset gifts exceeding prescribed limits are treated as income and taxed in the hands of the recipient. Knowing the exact rules of gift tax in India is crucial to determine whether a gift is taxable, who is required to pay tax, and how it must be reported to the Income Tax Department. This article explains gift tax in India by covering taxable and exempt gifts, applicable limits, and disclosure requirements in a clear and practical manner.

What Does “Gift Tax in India” Mean?

There is no separate “Gift Tax Act” in force in India today. Instead, the taxation of gifts is governed by Section 56(2)(x) of the Income Tax Act, 1961. Under this provision, gifts received by a person may be treated as income in the hands of the recipient and therefore taxable under “Income from Other Sources”  if certain conditions are met. 

In simple terms:

• If you receive certain gifts above a threshold value, the full value becomes part of your taxable income.

• If the gift qualifies for a statutory exemption, it is not taxed.

  
  

When Are Gifts Taxable?

1. Money and Movable Property

If you receive money or movable property (like jewellery, shares, paintings, digital assets) without consideration and the aggregate value in a financial year exceeds ₹50,000, the entire amount becomes taxable in your hands. 

Examples include:

• Cash or bank transfers totalling more than ₹50,000 from a non-relative.

• Gift of jewellery or shares worth more than ₹50,000 received from a friend.

The value of the property is determined by its fair market value (FMV) on the date of transfer. 

2. Immovable Property

For immovable property (like land or a house) received without consideration:

• If the stamp duty value exceeds ₹50,000, the entire stamp duty value is taxable. 

If you receive immovable property for consideration (i.e., you paid for it) but the stamp duty value exceeds what you paid by more than ₹50,000, the difference between the two values may be taxable.

3. Total Value in a Year Matters

It is the total value of all gifts received in a year that counts, not individual gifts. For example, two separate gifts of ₹30,000 and ₹25,000 in the same financial year will exceed the ₹50,000 threshold when aggregated.

Who Is Liable to Pay Gift Tax?

Under Indian tax law:

• The recipient of the gift is liable to pay tax if the gift is taxable.

• The donor (giver) does not pay gift tax unless other provisions apply (e.g., employer gifts as salary). 

• The taxable amount is added to the recipient’s total income and taxed at their applicable income tax slab rate.

  
  

Gifts That Are Not Taxable

Certain types of gifts are fully exempt from tax, regardless of value:

1. Gifts from Relatives

Gifts received from relatives are completely exempt, no matter the value. The Income Tax Act defines relatives broadly, including:

• Spouse, siblings (and their spouses)

• Parents and grandparents

• Lineal descendants (children, grandchildren)

• Lineal ascendants of spouse 

This exemption applies to cash, movable assets, and immovable property.

2. Gifts on Marriage

Gifts received on the occasion of your marriage are exempt, even if they come from non-relatives and are of high value. 

3. Inheritance or Will

Property or assets received by way of inheritance or under a will are not taxed as gifts. 

4. Gifts in Contemplation of Death

Gifts given by a person in anticipation of death are exempt. 

5. Gifts from Certain Institutions

Transfers from entities like registered charities, educational institutions, or local authorities that qualify under Sections 10(23C) or 12A/12AB are exempt. 

Are There Special Rules for Digital and International Gifts?

Yes, digital assets such as cryptocurrencies and NFTs received as gifts are treated under the same provisions of Section 56 if their fair market value exceeds ₹50,000 in a year. 

If gifts are received from abroad, their value counts toward the ₹50,000 aggregation and may be taxable if not from a relative or exempt category. 

Reporting Gifts in Your Income Tax Return

Taxable gifts must be disclosed in your Income Tax Return (ITR) under the head “Income from Other Sources.” They are then taxed at your applicable slab rate.

Even exempt gifts (such as from relatives) may need appropriate disclosure if the tax officer requests proof, and supporting documentation like gift deeds and relationship proofs should be maintained.

Conclusion

Understanding gift tax in India helps protect you from unintended tax liabilities and ensures you comply with income tax obligations. For high-value gifts or complex situations, consulting a qualified tax professional or chartered accountant is advisable.