September 14, 2025

The Income Tax Department just dropped an updated brochure explaining when you *don't* have to pay tax on money gifts! Usually, gifts from relatives are safe, but what about money gifts and property? Chartered Accountant Dr. Suresh Surana breaks it down for us with the magic of Section 56(2)(x) of the Income Tax Act, 1961. This section covers 'income from gifts and property received without adequate consideration.' That sounds complex, but here’s the gist: gifts from close relatives like your spouse, siblings, parents, or even lineal ancestors and descendants are generally *not* taxed. Also, gifts on special occasions like marriage, or those received under a will or when someone passes away – these too are tax-free. However, there are some spicy details! If you get an immovable property worth more than Rs. 50,000 without paying for it, it’s taxable – unless it’s from a relative defined broadly in the law. Dr. Surana explains that for 'relative,' think your husband, wife, brothers, sisters, their spouses, and your direct family tree. But if the price you paid for a property is way below the official stamp duty value by more than 10% and over Rs. 50,000, the government treats this gap as income and taxes it. So, who's a relative? The list includes spouses, siblings (and their spouses), parents, and lineal ascendants or descendants of you or your spouse. For Hindu Undivided Families (HUF), any member counts. The tax department also clarified nine gift transactions completely free from tax – like money received on your marriage day, gifts from a will or inheritance, gifts from local authorities, educational or hospital trusts meeting specific criteria, and certain amounts from trusts for relatives. Important note! Marriage is the *only* occasion when monetary gifts are tax-free. Gifts given during birthdays or anniversaries? Sorry, these are taxable. How about gifts from friends? They don’t get the relative-pass! Money gifts from friends or others must be reported and could be taxed if the total value exceeds Rs. 50,000 in a year. For the Assessment Year 2025-26 (Financial Year 2024-25), Dr. Surana advises taxpayers to clearly report taxable gifts in the Income Tax Return (ITR) under 'Income from Other Sources' (Schedule OS), and exempt gifts under 'Exempt Income' (Schedule EI) with a clear description. If you receive money gifts from abroad exceeding Rs. 50,000, and these gifts don’t fall under the exceptions, then they will too be taxed. Here's a spicy example Dr. Surana gives: Mr. Kumar got Rs. 1,84,000 from his friend in Canada, Rs. 25,200 from his elder brother in Delhi, and Rs. 84,000 from his friend on his birthday. The Rs. 1,84,000 from his friend? Fully taxable! The Rs. 25,200 from his brother? Totally exempt, because brother is a relative. The Rs. 84,000 birthday gift from a friend? Taxable, because birthday gifts are NOT in the exemption list. Remember, when your total gifts from non-relatives go above Rs. 50,000 in a year, the *whole* amount is taxable, not just the part above Rs. 50,000. So watch out! In short, gifts can be sweet but tax rules are spicy! Know your relatives, occasions, and keep your ITR reports neat and clear. As Dr. Surana says, understanding these rules helps you avoid surprises and enjoy your gifts tax-free where allowed.

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Tags: Income tax, Gifts tax, Section 56(2)(x), Tax exemption, Relatives gifts, Itr filing,