In India, gifts in the form of money or movable/immovable property are taxable if their total value exceeds ₹50,000. When this limit is crossed, the full value becomes taxable under the head ‘Income from Other Sources’, except when received from an employer, where it is treated as a part of salary perquisites. However, tax exemptions are available for gifts received from specified relatives, on the occasion of marriage, through inheritance, or from registered charitable or religious trusts. The taxable amount is calculated based on the type of gift and its stamp duty value or fair market price. Maintaining proper documentation and declaring such gifts accurately in the income tax return is important to avoid legal issues.

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What is Gift Tax in India?

Gift taxation was first brought under the Gift Tax Act, 1958, but this act was abolished in 1998. Although the Gift Tax Act is no longer in force, gifts remain taxable. Presently, gift-related taxation is governed by the Income Tax Act, 1961, particularly Section 56(2)(x).

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What Is Considered a ‘Gift’ Under the Income Tax Act?

According to the Income Tax Act, a gift is any sum of money or property—movable or immovable—received without providing any consideration in return.

So, the following items are treated as gifts for tax purposes:

• Money: Cash, cheque, demand draft, bank transfer, etc.
  
• Movable Property: Shares, securities, jewelry, bullion, paintings, sculptures, and other valuable items. If these are acquired for less than their fair market value, the difference is also considered a gift.
  
• Immovable Property: Land, buildings, residential or commercial real estate. If you acquire such property below its stamp duty value, the Income Tax Act deems the difference as a taxable gift.

Gifts Exempted from Tax

While certain gifts are taxable in India, the Income Tax Act provides several important exemptions where no gift tax applies. Below is a simplified breakdown of situations where gifts are not taxed.

Recipient of Gift	Giver of Gift	Occasion / Condition
Individual	Specified relative (spouse, siblings of self or spouse, siblings of parents or parents-in-law, any lineal ascendant or descendant of self or spouse, and spouses of these relatives)	Not applicable
Individual	Any person	On the occasion of marriage
Any person	Any person	Received under a will or through inheritance
Any person	Individual	Gift received in contemplation of the donor’s death
Any person	Local authority (such as Panchayat, Municipality, Municipal Committee, District Board, Cantonment Board)	Not applicable
Any person	Fund, foundation, university, educational or medical institution covered under Section 10(23C)	Not applicable
Any person	Charitable or religious trust registered under Section 12A or 12AA	Not applicable
Charitable, educational, religious, or philanthropic trust or institution approved by the prescribed authority	Any person	Not applicable
Members of a Hindu Undivided Family (HUF)	HUF	Distribution of assets on partition of the HUF
Trust created only for the benefit of an individual’s relative	Individual	Not applicable

How to Calculate the Taxable Value of a Gift

To determine how much gift tax you may need to pay in India, the Income Tax Act provides clear rules for calculating the taxable amount. The table below explains how taxable value is assessed for different types of gifts, whether in cash, property, or assets.

Type of Gift	When Tax Applies	Taxable Amount
Money received through cash, cheque, or bank transfer	When the total amount received is more than ₹50,000	The entire amount received as a gift
Immovable property (land, building, etc.) received without paying anything	When the stamp duty value of the property exceeds ₹50,000	The full stamp duty value of the property
Immovable property received for a price lower than its stamp duty value	When the difference between stamp duty value and the amount paid is more than ₹50,000	Tax is charged on the difference between the stamp duty value and the actual amount paid
Movable assets like jewelry, shares, paintings, sculptures, etc. received without payment	When the total fair market value of such items exceeds ₹50,000	The fair market value of the gifted items
Movable assets like jewelry, shares, artwork, etc. received after paying a lower amount than fair market value	When the fair market value exceeds the amount paid by more than ₹50,000	The taxable amount is the difference between the fair market value and the amount paid

Gift Tax Exemption – List of Relatives and Conditions

Gifts are a delightful part of celebrations and relationships, but when it comes to taxation in India, knowing the rules can help you avoid unwanted surprises. Understanding who can give you tax-free gifts and under what circumstances is essential.

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Are Gifts from Friends Taxable?

Yes, gifts from friends can be taxable. If you receive money, property, or valuable items from non-relatives and the total value exceeds ₹50,000 in a financial year, the entire amount becomes taxable under “Income from Other Sources.” This applies even if the gifts are received on special occasions, unless specific exemptions apply.

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Tax-Free Gifts from Relatives

Gifts received from specified relatives are fully exempt from tax, no matter the amount. The Income Tax Act clearly defines who is considered a “relative” for this purpose:

• Spouse – Gifts exchanged between husband and wife are exempt.
  
• Brothers and Sisters – Includes your own siblings as well as those of your spouse.
  
• Parents, Grandparents, and Ancestors – Gifts from parents, grandparents, or great-grandparents are not taxable.
  
• Children and Grandchildren – Any gift received from your children, grandchildren, or other direct descendants is tax-free.
  
• In-laws – This covers your spouse’s parents, brothers, sisters, and other direct relatives.
  

These exemptions ensure that gifts within a close family circle do not lead to a tax liability.

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Gifts Received on the Occasion of Marriage

One of the most generous exemptions under Indian tax law is for gifts received during a wedding. Any gift received by an individual on the occasion of their marriage—whether in the form of cash, property, jewelry, or other assets—is completely exempt from tax. There is no monetary limit and the exemption applies irrespective of who gives the gift.

Tax Saving Through Gifts

If you gift money or valuables to someone who is not a specified relative, you can give up to ₹50,000 in a financial year without triggering tax. If the total value of gifts exceeds this amount, it becomes taxable in the hands of the receiver under their applicable income tax slab.

Smart Tax-Saving Strategy: Clubbing of Gifts

A practical way to reduce tax liability is by gifting to close family members such as parents, children, or in-laws. While the gift itself is not taxable, any income earned from investing that gift (like interest, rent, dividends) will be taxed in the hands of the receiver—not the giver.
This helps you manage your taxes more efficiently without increasing your taxable income.

However, the Income Tax Department closely monitors large gift transactions, so make sure to maintain proper documentation, especially for high-value gifts or property transfers.

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How to Declare Tax on Gifts in India

As per current Income Tax laws, the receiver of the gift must declare taxable gifts while filing their Income Tax Return (ITR).

• Report under: Income from Other Sources
  
• What to report: The total taxable value of gifts received during the financial year
  
• How tax is calculated: The gift value is added to your total income and taxed as per your income tax slab rate
  

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Gift Tax and Stamp Duty on Property Transfers

Stamp duty is a state-level tax applied to legal documents when transferring immovable property, even if it’s gifted. It is calculated based on the stamp duty value or circle rate of the property.

Key Provisions to Know

1. Gift of Property Over ₹50,000
   If the stamp duty value of the gifted property exceeds ₹50,000, it becomes taxable unless received from a specified relative.
   
2. Difference Between Agreement and Registration Dates
   
   • If the agreement date and registration date differ, the stamp duty value on the agreement date can be used for tax calculation.
     
   • For this to apply, part of the payment must be made before the agreement date through bank transfer, cheque, or draft.
     
   • This helps when stamp duty rates increase between agreement and registration.
     
3. Disputing Stamp Duty Value (Section 50C & Section 56(2)(x))
   
   • If the stamp duty authority assigns a higher value, you can challenge it and refer the case to a Valuation Officer (VO).
     
   • The VO will review documents and decide a fair value. If the VO’s value is lower, it can be used for tax purposes.
     
4. 10% Safe Harbour Rule (Section 56(2)(x) Relaxation)
   No tax is applicable if the difference between actual transaction value and stamp duty value is within 10% of the transaction value.
   
   Example:
   
   • Actual Property Value: ₹6,00,000
     
   • Stamp Duty Value: ₹6,55,000
     
   • Difference: ₹55,000 (which is less than 10% of ₹6,00,000 = ₹60,000)
     ✅ No tax is applicable under Section 56(2)(x).

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