Understanding Gift Tax Provisions Under the Income Tax Act

When you receive a gift whether it is money, jewellery, or property the Income Tax Department treats it as a form of income. However, the good news is that Indian tax law provides several exemptions where gifts are completely tax-free.

This guide explains gift tax rules in simple and clear language, without complex legal terms.

1. Gifts That Are Always Tax-Free

 Gifts Received on Your Wedding

Any gift received on the day of your marriage cash, cheque, jewellery, or property is fully tax-free, with no upper limit.

Important: This exemption applies only to your own wedding. Gifts received on birthdays, anniversaries, or someone else’s wedding are not covered.

 Gifts Received as Inheritance

Money or property received through a Will or as a legal inheritance after someone’s death is completely tax-free.

 Gifts Received on Partition of HUF Property

Any money or assets received when a Hindu Undivided Family (HUF) property is divided are tax-free.

2. Gifts From Relatives Are Always Tax-Free

If you receive a gift from a person defined as a relative under income tax law, the gift is 100% tax-free, regardless of the amount.

Who Is Considered a Relative?

• Your spouse (husband or wife)
• Your brother or sister
• Your spouse’s brother or sister
• Your parents’ siblings (chacha, bua, mama, mausi)
• Your parents, grandparents, and great-grandparents
• Your children, grandchildren, and great-grandchildren
• Spouse of any of the above relatives

Examples of Tax-Free Gifts

• Gift from father or mother
• Gift from brother or sister
• Gift from grandfather
• Gift from father-in-law or mother-in-law

3. Gifts From Friends or Others: ₹50,000 Limit Rule

If you receive gifts from people who are not relatives, a limit applies.

Exemption Limit

You can receive gifts worth up to ₹50,000 in a financial year (April 1 to March 31) without paying tax.

Tax Rule

If the total value of such gifts exceeds ₹50,000 even by ₹1, the entire amount becomes taxable.

Examples

4. How Is Tax Calculated on a Taxable Gift?

If a gift is taxable, the amount is added to your total income for the year and taxed according to your normal income tax slab rate.

For example, if your tax slab is 20%, the taxable gift amount will also be taxed at 20%.

5. Important Things to Remember

• Always receive large gifts through bank transfer or cheque for proper proof.
• Keep gift deeds or confirmations for record.
• Income earned from a gift (interest, rent, etc.) is taxable even if the gift itself is tax-free.

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