Gift Tax Under Section 56(2)(x) — When Gifts Are Taxable and When They Are Exempt

India does not have a standalone Gift Tax law — the original Gift Tax Act 1958 was repealed in 1998. However, gifts received by individuals and HUFs may be taxable under Section 56(2)(x) of the Income Tax Act as "Income from Other Sources" — if they exceed specified limits and don't fall within the exempt categories. Here is the complete guide.

When are Gifts Taxable Under Section 56(2)(x)?

The following are taxable as income if received without adequate consideration:

• Cash/cheque gifts: If the aggregate value exceeds ₹50,000 in a financial year — the entire amount (not just the excess) is taxable as "Income from Other Sources"
• Immovable property received without consideration: If stamp duty value exceeds ₹50,000 — the stamp duty value is taxable
• Immovable property received for less than stamp duty value: If the difference (stamp duty value minus actual consideration) exceeds ₹50,000 — the difference is taxable
• Movable property (shares, jewellery, art, etc.): If fair market value exceeds ₹50,000 when received without consideration — taxable

Exempt Gifts — When No Tax Applies

Gifts from the following sources are completely exempt regardless of amount:

• Gifts from specified relatives: Spouse, siblings (and their spouses), parents and grandparents, lineal ascendants/descendants and their spouses
• Gifts received on the occasion of marriage (from anyone — not limited to relatives)
• Gifts received under a will or by inheritance
• Gifts received in contemplation of death of the donor
• Gifts from local authority or charitable trust registered under Section 12A/12AB
• Gifts from employer (these are perquisites taxed under Section 17(2), not 56(2)(x))

Who are "Specified Relatives"?

The full list of relatives from whom gifts are tax-free:

• Spouse
• Brother or sister (and their spouses)
• Brother or sister of spouse (and their spouses)
• Parents, grandparents (and their spouses)
• Lineal ascendant or descendant of the person (and their spouses)

Note: Gifts from friends, cousins, uncles/aunts (other than the above) are NOT from specified relatives — they are taxable if above ₹50,000.

Conclusion

Gift tax under Section 56(2)(x) catches gifts beyond ₹50,000 from non-relatives — making it essential to understand the relative definition before receiving or gifting assets. SPOTON provides expert income tax advisory on gift planning and correct reporting of gift income in ITR. Contact us for comprehensive tax planning services.