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Tax on Gift: Rules and Exemptions As per Income Tax Act in India

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Hiral Vakil

Exempt Income
Gift Income
IFOS

What is Gift as per Income tax Act?

Gift as per Income tax act means property (both movable and immovable) and money (cash, cheque, draft, etc) received without consideration or against inadequate consideration. Let’s understand what movable and immovable property include on which income tax provisions apply:

When are Gifts taxable?

Guide: Income from Other sources and Taxes
Any income which is not specifically taxed under any other head of income will be taxed under Income from other sources head.
Read More
Guide: Income from Other sources and Taxes
Any income which is not specifically taxed under any other head of income will be taxed under Income from other sources head.
Read More

When Gifts received are exempt from tax?

Under the following situations, gifts received are non-taxable in hands of recipient irrespective of monetary value:

Relative*

Here is the summary of all the scenarios for better understanding:

Gift Consideration Amount taxable
Money (cash, cheque, draft) Nil If money > 50,000; whole amount taxable
Immovable property Nil If Stamp duty value > 50,000; Stamp duty value would be taxable
Immovable property (as defined above) Received which is less than stamp duty value by an amount exceeding Rs 50,000 [Stamp duty value – consideration] would be taxable
Agricultural land in rural area Nil/received Nil
Movable property (as defined above) Nil Fair market value > 50,000; Fair market value would be taxable
Movable property (as defined above) Received which is less than Fair market value by an amount exceeding Rs 50,000 Fair market value – consideration > 50,000 Fair market value would be taxable
Property/money on the occasion of marriage Nil/received Completely exempt irrespective of value
Any gifts not included in definition above Nil/received Completely exempt irrespective of value
Earned Income from Other Sources
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Earned Income from Other Sources
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FAQs

Are monetary gifts received from friends liable to tax?

Gifts received from relatives are not charged to tax.
Friend is not a relative as defined in the list and hence, gift received from friends will be charged to tax (if other criteria of taxing gift are satisfied).​

Is gift in cash taxable?

Gift of money: Aggregate value of cash gifts received without consideration during a financial year would be taxable as Income from Other Sources in the hands of the recipient. However, if the aggregate value of such gifts is less than Rs 50,000, then it would be exempt from tax

  • Eshant Shah says:

    Was not able to understand the 2nd point under “When are gifts taxable” regarding Nisha’s example. Can you revisit the same?

    • Aakash (Quicko Customer Success Representative) says:

      Hello,

      Understand the taxability of gifts with this example:

      Tax treatment for Sender
      If you gift shares to your wife, it shall be considered as a ‘transfer’ and thus Capital Gains would arise.
      If shares were held for more than 12 months from date of purchase to date of gifting, LTCG or else STCG

      Sale Date = Date of transfer
      Sale Value = Market Value as on date of transfer
      Tax Liability = 10% without indexation benefit (since STT is not paid on transfer)
      Tax treatment for receiver

      No tax on gift transaction since it is exempt
      On sale of shares, Capital Gains would arise
      If shares were held for more than 12 months from date of gifting to date of sale, LTCG or else STCG

      Purchase Date = Date of receiving gift
      Purchase Value = Market Value as on date of receiving gift
      Tax Liability = 10% without indexation benefit (since STT is not paid on purchase)

      Hope this helps 🙂

  • Venkat says:

    Hi, your answer is contradicting the blog post above.

    Kindly review your answer. Thanks.

    In the case of Gifting to relative (Spouse)

    Understand that Tax liability will arise only when we sell the holdings from receiving end, buy value will be the original buy value of the sender.

    We need not pay STCG/LTCG for gifting.

    Kindly review once again and advise.
    Thanks

    • Aakash (Quicko Customer Success Representative) says:

      Hey,

      The donor of the gift is not required to pay any tax and so the tax treatment in the hands of the recipient of the gift is based on the cost of acquisition and holding period of the previous owner.

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