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In India, gifts are taxed under the Income Tax Act since the Gift Tax Act was repealed in 1998. There is no specific gift tax, but gifts are subject to income tax. Gifts up to ₹50,000 per year are tax-free. Additionally, gifts from specific relatives, such as parents, spouse, and siblings, are also exempt. Let’s explore how gifts are taxed in India.
What is Considered a Gift?
As per the Income Tax Act, a gift includes any money or movable/immovable property that an individual receives without any payment.
Here are the types of gifts:
- Monetary Gifts: Cash, cheques, drafts, bank transfers, etc.
- Movable Property: Shares, bonds, jewelry, paintings, sculptures, etc. This also includes properties bought at a price lower than the market value.
- Immovable Property: Land, buildings, or any real estate. This includes properties bought at a price lower than their stamp duty value.
Gifts Exempt from Tax
- Gifts up to ₹50,000: If you receive gifts up to ₹50,000 in a year, they are tax-free. However, if the total value exceeds this limit, the entire amount becomes taxable. For example, if you get a gift of ₹75,000 from a friend, the full ₹75,000 is taxable as "Income from Other Sources."
- Property for a Lower Price: If you receive a property (movable or immovable) for a price lower than its actual value, the difference between the paid amount and the market value will be taxed. For example, if a flat is worth ₹50 lakhs but you pay ₹30 lakhs, the difference of ₹20 lakhs is taxable.
- Gifts from Relatives: Gifts from relatives such as your spouse, parents, siblings, and any lineal ascendants or descendants are tax-free, regardless of the amount. However, income earned from such gifts (like interest on an FD) is taxable under clubbing provisions.
- Gifts on Marriage: Gifts received on the occasion of marriage are not taxed.
- Other Exemptions:
- Gifts received due to a person’s death or under a will/inheritance.
- Property received from local authorities or certain institutions and trusts as specified under the Income Tax Act.
How to Calculate Taxable Gifts
| Type of Gift | Tax Applicability | Taxable Value |
|---|---|---|
| Cash, cheque, bank transfer | If total value exceeds ₹50,000 | Full amount is taxable |
| Immovable property (without payment) | If stamp duty value exceeds ₹50,000 | Stamp duty value is taxable |
| Immovable property (bought for a lower price) | If the difference between stamp duty and purchase price is over ₹50,000 | The difference is taxable |
| Movable assets (like shares, jewelry) without payment | If fair market value exceeds ₹50,000 | Fair market value is taxable |
| Movable assets (bought for a lower price) | If the fair market value exceeds the purchase price by ₹50,000 | The difference is taxable |
How to Declare Gifts for Taxation
Gifts are considered part of your income, and you must declare them when filing your Income Tax Return (ITR) under the category "Income from Other Sources." The tax liability depends on your total income and the applicable tax slab.
Tax on Gifts from Friends
Gifts from friends are taxable if their value exceeds ₹50,000 in a year. Friends are not considered relatives for tax purposes, so any monetary or non-monetary gift from a friend is taxed if it breaches the ₹50,000 limit.
Tax on Gifts from Relatives
Gifts from specified relatives are fully exempt from tax, no matter how much they are worth. Relatives include:
- Spouse
- Parents
- Siblings (and their spouses)
- Lineal ascendants/descendants (e.g., grandparents, children)
- Members of a Hindu Undivided Family (HUF)
Tax on Gifts Received in Marriage
Gifts received on your marriage, whether cash or property, are completely exempt from tax. However, gifts received on other occasions like birthdays or anniversaries are taxable.
