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Section 56(2) — Gifts, Angel Tax & Income from Other Sources

Updated: 3 June 2026  |  Income-tax Act 2025  |  Angel Tax Abolished April 2024

Section 56(2) taxes certain receipts as "Income from Other Sources" — including gifts > ₹50,000 from non-relatives (entire amount taxable). Angel tax (Section 56(2)(viib)) was abolished from April 1, 2024. Relatives' gifts are fully exempt. Lottery winnings taxed at flat 30%.
₹50,000
Gift threshold — any gift above ₹50,000 from a non-relative is fully taxable as other income.
Gifts from relatives (parents, spouse, siblings, children, grandparents) are always fully exempt — no limit. Angel tax abolished from FY 2024-25.

Gifts — Taxable vs Exempt under Section 56(2)

Gift TypeFrom RelativeFrom Non-RelativeOn Marriage
Cash gift (any amount)ExemptTaxable if total >₹50K/yearExempt
Immovable property (no consideration)ExemptTaxable if stamp duty value >₹50KExempt
Immovable property (inadequate consideration)ExemptTaxable if diff >₹50K or 10%Exempt
Movable property (shares, jewellery, gold)ExemptTaxable if FMV >₹50KExempt
Inherited property (will/inheritance)ExemptExemptExempt
Gift from employerTaxable as perquisite (Section 17)Taxable as perquisiteTaxable

Other Income Covered Under Section 56(2)

Income TypeTax TreatmentDeduction Available
Dividends from Indian companiesSlab rate (DDT abolished Apr 2020)Interest on loan to earn dividend
Lottery/puzzle/card game winnings30% flat + 4% cess (no slab)None
Interest on savings accountSlab rate; 80TTA/80TTB deduction₹10,000 (80TTA) / ₹50,000 (80TTB senior)
Family pension receivedSlab rate₹15,000 or 33.33% (Section 57)
Keyman insurance policy proceedsSlab rateNone
Rent from machinery/furnitureSlab rateRepairs, depreciation (Section 57)
Foreign dividendsSlab rateDTAA relief possible

Frequently Asked Questions

What income is covered under Section 56(2) of Income-tax Act 2025?
Section 56(2) (Income from Other Sources) covers a wide range of receipts: (a) Dividends; (b) Lottery/game/crossword winnings; (c) Interest on securities; (d) Rental income from machinery/furniture/plant; (e) Gifts received — money or property exceeding ₹50,000 from non-relatives; (f) Shares received at less than fair market value (excess over ₹50,000 threshold); (g) Shares issued by closely held company at premium exceeding FMV — also called "angel tax" (Section 56(2)(viib) — but abolished for all investors from April 1, 2024); (h) Perquisite receipts not taxable under salary; (i) Sum received under keyman insurance policy; (j) Family pension (partially — after ₹15,000 or 33.33% deduction under Section 57).
Which gifts are taxable and which are exempt under Section 56(2)?
Gifts TAXABLE (Section 56(2)(x)): Cash gifts > ₹50,000 from non-relatives in a year (entire amount taxable, not just excess). Immovable property received without consideration where stamp duty value > ₹50,000. Immovable property received at inadequate consideration where stamp duty value exceeds consideration by > ₹50,000 or 10% (whichever higher). Movable property (shares, jewellery, art) received without consideration > ₹50,000. Gifts EXEMPT: Gifts from "relatives" (spouse, siblings, parents, grandparents, etc.). Gifts on marriage. Gifts by will/inheritance. Gifts from local authorities, trusts, government. Gifts up to ₹50,000 in a year from any single non-relative.
Was angel tax abolished? What is the current status?
Section 56(2)(viib) — Angel Tax: This provision taxed shares issued by closely held Indian companies to investors (including foreign investors from 2023) at a premium exceeding fair market value. The excess was treated as income for the company. Budget 2024: Angel tax under Section 56(2)(viib) was ABOLISHED effective April 1, 2024 (FY 2024-25 onwards). This means: New share issues to investors at any premium are no longer taxable under this provision. Past assessments (before FY 2024-25) may still be litigated. Indian startups raised this issue for years — abolition is a major relief for startup ecosystem. Section 56(2)(viia) for receipt of shares by companies from other companies also substantially narrowed.
How is Section 56(2) income taxed?
Income covered under Section 56(2) is taxed as "Income from Other Sources" at applicable slab rates (for individuals/HUF). Exceptions: Lottery/game winnings: 30% flat tax (Section 115BB) + cess — no slab rates. Dividends: slab rates (DDT abolished from April 2020). Interest income: slab rates. Gifts received: slab rates. In the return: Report in Schedule OS (Other Sources) in ITR-2 or ITR-3. Deductions allowed: Section 57 permits deductions like interest on loan to earn dividend income, repairs for let-out machinery, family pension deduction (lesser of ₹15,000 or 33.33% of pension). Deductions NOT allowed: General expenses of taxpayer not directly related to income.
Is there a relative exemption for gifts? Who qualifies as a relative?
Yes — gifts from "relatives" are fully exempt (Section 56(2)(x) proviso). Relatives include: spouse, brother, sister, brother/sister of spouse, brother/sister of either parent, any lineal ascendant or descendant (parents, grandparents, children, grandchildren), lineal ascendant or descendant of spouse, spouse of any of the above. So: gifts from parents, in-laws, grandparents, adult children, siblings and their spouses — all exempt. NOT relatives: uncle, aunt (father's/mother's brother/sister — not covered as lineal descendants), cousins, friends, employers. Wedding gifts from any person (even non-relatives): exempt — no limit. Note: HUF to its members — not covered; separate treatment.

Related Pages

Gift Tax India Income from Other Sources Tax on Lottery Dividend Tax File ITR
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