Under Section 56(2)(x) of the Income Tax Act, gifts from specified relatives such as parents, spouse, siblings and children are exempt from tax, regardless of the amount. However, gifts from non-relatives can become taxable if their aggregate value exceeds ₹50,000 in a financial year.
₹50,000 limit applies to total non-relative gifts
A common mistake taxpayers make is treating the ₹50,000 threshold as a limit applicable to each individual gift. The limit applies to the total value of gifts received from non-relatives during the year.
“For example, receiving ₹30,000 from a friend in June and ₹25,000 from a colleague in December takes the total value of gifts to ₹55,000. In such a case, the entire amount becomes taxable, not just the excess ₹5,000,” said CA Parag Jain, Tax Head, 1 Finance, an Indian consumer financial institution.
Such taxable gifts are reported under the head “Income from Other Sources”.
Exempt gifts may still require disclosure
Taxpayers often assume that gifts from relatives, being exempt, do not need to be mentioned in the ITR. However, the reporting format for AY 2026-27 has introduced specific disclosure requirements for certain exempt receipts.
“The updated utility includes a field for relative gifts under Receipts Not in the Nature of Income. The gifts remain exempt, but disclosure is now expected,” Jain said.
Adhil Shetty, CEO, BankBazaar, an Indian online financial marketplace, said taxpayers should not ignore exempt gifts while filing returns, especially when large transactions are reflected in AIS. “A large bank transfer from a parent appearing in AIS with no ITR entry can generate a mismatch query,” he said.
Donor relationship determines taxability
The tax treatment depends on the relationship between the donor and recipient, and not the location or source of funds.
A gift from an NRI parent remains exempt, while a gift from an NRI friend can be taxable if the aggregate value crosses ₹50,000. Similarly, cousins are not included in the list of specified relatives under tax rules, and gifts received from them may be taxable.
Wedding gifts and inheritance remain exempt
Gifts received on the occasion of marriage are exempt from tax, irrespective of the amount or the person giving the gift. Inherited assets are also not treated as taxable gifts under Section 56(2)(x).
Documents to keep for gift transactions
Taxpayers should maintain records supporting significant gifts, including bank transfer details, donor information and proof of relationship.
For large-value gifts, experts recommend maintaining a gift deed mentioning the amount, date and relationship between the parties. In case of property gifts, registered documents and stamp duty records should be preserved.
With greater reliance on data matching through AIS, taxpayers should ensure that gifts are correctly classified and disclosed while filing their returns.
