Gift Tax in India: What's Taxable, What's Exempt & How to Report

The Core Rule: Section 56(2)(x)

Under Section 56(2)(x) of the Income Tax Act, the following are taxable as income of the recipient in the year of receipt:

Tax rate: at applicable slab rate as income from other sources.

The ₹50,000 Threshold: Aggregate, Not Per Gift

The ₹50,000 limit is aggregate across all gifts received from non-relatives during the financial year — not per individual gift. If you receive ₹20,000 from friend A, ₹20,000 from friend B, and ₹15,000 from colleague C, the total is ₹55,000 — the entire ₹55,000 is taxable (not just the ₹5,000 excess). This is a key misunderstanding — crossing the threshold makes the whole amount taxable.

Who Is a "Relative"? — The Exempt List

Gifts from relatives are fully exempt regardless of amount. The Income Tax Act defines "relative" specifically for this purpose:

• Spouse
• Brother or sister
• Brother or sister of the spouse
• Brother or sister of either parent
• Any lineal ascendant or descendant (parents, grandparents, children, grandchildren)
• Any lineal ascendant or descendant of the spouse
• Spouse of any of the above relatives

Other Exempt Situations (Even From Non-Relatives)

Gifts received in the following situations are exempt regardless of amount and regardless of whether from relative or non-relative:

• On the occasion of marriage — gifts received by the bride/groom on their wedding day (not before, not after)
• Under a will or inheritance — property received under a deceased person's will
• In contemplation of death — gift from a person in apprehension of death (causa mortis)
• From a local authority
• From any fund, foundation, university, hospital, or institution referred to in Section 10(23C)
• From a registered charitable trust (Section 12A/12AA)

Gifts of Shares and Securities

Shares and securities received as gifts are particularly common — ESOPs, transfers from parents, wedding gifts of shares. Treatment:

• FMV of shares on the date of receipt = value used for Section 56(2)(x) taxation (if received from non-relative exceeding threshold)
• Cost of acquisition for future capital gains = FMV on date of receipt (same as the value on which gift tax was paid) — avoids double taxation
• Holding period for capital gains starts from date of receipt of gift

For capital gains on subsequent sale of gifted shares, see our capital gains tax guide.

Gifting to Spouse or Minor Child: Clubbing Rules

Even though gifts to a spouse or minor child are exempt from Section 56(2)(x) (they're relatives), the income earned from the gifted asset is clubbed back with the donor's income under Sections 64(1)(iv) and 64(1A). For example: if you gift ₹20 lakh to your spouse who puts it in an FD earning ₹1.5 lakh interest — that ₹1.5 lakh interest is added to your taxable income, not your spouse's. See our clubbing of income guide.

How to Report Gifts in Your ITR

Taxable gifts must be reported under "Income from Other Sources" in your ITR:

• Use ITR-2 (if salaried with gift income) or ITR-3 (if also has business income)
• Report under Schedule OS (Other Sources) — specify the nature: "Gift received from non-relative"
• For immovable property gifts, also report in Schedule AL (Assets and Liabilities) if income exceeds ₹50 lakh
• Keep documentation: gift deed, bank transfer proof, FMV certificate (for property/shares)

Gifts received must also reflect in your AIS (Annual Information Statement) if the payer is a regulated entity. Cross-check your AIS before filing — see our Form 26AS vs AIS guide.