Section 56(2) is the charging section for "Income from Other Sources". A gift over ₹50,000 in a year from a non-relative is fully taxable at your slab rate — not just the excess. Gifts from relatives, on marriage or by will/inheritance are fully exempt with no limit. Angel tax under Section 56(2)(viib) was abolished from 1 April 2024. Lottery and game winnings are taxed at a flat 30% under Section 115BB.
Gifts — Taxable vs Exempt under Section 56(2)(x)
If the aggregate of gifts from all non-relatives in a financial year crosses ₹50,000, the entire amount becomes taxable — the ₹50,000 is a threshold, not a standard deduction.
| Gift type | From relative | From non-relative | On marriage |
|---|---|---|---|
| Cash / money (aggregate in a year) | Exempt | Taxable if > ₹50,000 | Exempt |
| Immovable property (no consideration) | Exempt | Taxable if SDV > ₹50,000 | Exempt |
| Immovable property (inadequate price) | Exempt | Diff > ₹50,000 or 10% | Exempt |
| Movable property (shares, jewellery, art) | Exempt | Taxable if FMV > ₹50,000 | Exempt |
| By will / inheritance | Exempt | Exempt | Exempt |
| From employer | Perquisite u/s 17 | Perquisite u/s 17 | Perquisite |
SDV = stamp duty value; FMV = fair market value. Property gifts are compared to SDV/FMV, cash gifts are aggregated across all non-relatives in the year.
If a friend gifts you ₹60,000, the full ₹60,000 is taxable as Income from Other Sources — not ₹10,000. But ₹50,000 flat from a non-relative is entirely exempt because it does not cross the threshold. Keep gift deeds and bank trails to prove the relationship or the occasion.
Who Counts as a "Relative"?
Gifts from a defined list of relatives are always exempt, whatever the amount. The definition is specific — many people you casually call "relatives" (uncle, aunt, cousin) are not included.
Relatives — gift is EXEMPT
- Spouse
- Brother or sister (and their spouses)
- Brother/sister of spouse
- Brother/sister of either parent
- Any lineal ascendant/descendant (parents, grandparents, children, grandchildren)
- Lineal ascendant/descendant of spouse (in-laws)
NOT relatives — gift is TAXABLE
- Uncle / aunt (parent's brother/sister's spouse etc. beyond the list)
- Cousins
- Friends, colleagues, employers
- Nephew / niece giving to uncle (one-way — check direction)
- HUF gifting to a member (treated separately)
Gifts received on the occasion of your marriage are fully exempt under Section 56(2)(x) — even from friends, colleagues or distant relatives, and with no upper limit. The exemption is for the individual getting married, on that occasion.
Angel Tax — Section 56(2)(viib) Abolished
Section 56(2)(viib) — "angel tax" — taxed the share premium above fair market value received by a closely-held company as its income. Finance (No.2) Act 2024 abolished this provision for all investors from 1 April 2024 (AY 2025-26), after it was extended to non-resident investors in 2023.
| Period | Angel tax on premium > FMV | Applies to |
|---|---|---|
| Up to FY 2022-23 | Applicable | Resident investors |
| FY 2023-24 | Applicable | Resident + non-resident investors |
| FY 2024-25 onward | Abolished | No investor — provision removed |
Assessments for years before FY 2024-25 can still be litigated; abolition is prospective from AY 2025-26.
Raised capital at a premium in an earlier year and got an angel-tax notice? Get your position reviewed.
Talk to a Tax Expert →Other Income Covered by Section 56(2)
| Income type | Tax treatment | Deduction (Section 57) |
|---|---|---|
| Dividends from Indian companies | Slab rate | Interest on loan to earn it (max 20%) |
| Lottery / crossword / card game / online game winnings | 30% flat + cess | None |
| Interest on savings / deposits | Slab rate | 80TTA ₹10,000 / 80TTB ₹50,000 (old regime) |
| Family pension | Slab rate | ₹25,000 (new) / ₹15,000 or 1/3rd (old) |
| Rent of plant, machinery, furniture | Slab rate | Repairs, insurance, depreciation |
| Keyman insurance policy proceeds | Slab rate | None |
| Interest on securities | Slab rate | Collection charges |
Winnings are taxed at a flat 30% under Section 115BB with no basic-exemption benefit and no deductions; TDS applies u/s 194B/194BA.
How Section 56(2) Income Is Taxed & Reported
- Report under Schedule OS (Income from Other Sources) in ITR-2 or ITR-3 (ITR-1 for simple interest/family-pension cases).
- Most receipts are taxed at your slab rate; only lottery/gaming winnings are at the flat 30% under Section 115BB.
- Section 57 allows a limited set of deductions (interest to earn dividend, repairs on let-out assets, family-pension standard deduction).
- Family-pension standard deduction was raised to ₹25,000 under the new regime from AY 2025-26 (₹15,000 or one-third under the old regime).
Cash gift of ₹60,000 from a friend
₹40,000 from friend + ₹30,000 from cousin
The ₹50,000 limit is not per gift or per person — it applies to the total of all cash gifts from non-relatives in the financial year. Two ₹30,000 gifts from two friends (₹60,000 total) cross the limit and the whole ₹60,000 becomes taxable.
Section 56(2) — Frequently Asked Questions
Related TaxClue services
Gifts, Angel Tax & Other Sources — Filed Right
Whether you received a large gift, sold shares, won a prize or need Schedule OS handled correctly, TaxClue's CA-led team files your return accurately and defends your position — 100% online, across India.