Tax on Gifts in India 2025-26 — Section 56(2)(x) Rules & Exemptions | TaxClue

Tax on Gifts Received in India — Section 56(2)(x)

Updated: 3 June 2026

India does not levy a separate "gift tax" — gifts are taxed as Income from Other Sources under Section 56(2)(x) of the Income-tax Act. The key rule: gifts from specified relatives (parents, spouse, siblings, children, grandparents, in-laws) are completely exempt — no limit. For gifts from non-relatives, if the total value of all gifts in a financial year exceeds ₹50,000, the entire amount (not just the excess over ₹50,000) becomes taxable at your applicable income tax slab rate. Wedding gifts and inheritances are always exempt regardless of source or amount.

₹50,000

Annual threshold for gifts from non-relatives. Breach this limit and the full value of all non-relative gifts is taxable — not just the excess. There is no TDS on gifts; the recipient must report taxable gifts in their ITR.

Tax Treatment by Gift Scenario

Gift Scenario	Taxable?	Limit / Condition	Section
Cash from parents / spouse / siblings / children	No — Fully Exempt	No limit on amount	56(2)(x) proviso
Cash from friend / colleague (non-relative)	Yes, if total > ₹50,000	Sum of ALL non-relative gifts in FY	56(2)(x)(a)
Property (immovable) from relative	No — Fully Exempt	No limit	56(2)(x) proviso
Property (immovable) from non-relative	Yes, if stamp duty value > ₹50,000	Stamp duty value taxed	56(2)(x)(b)
Shares / securities from non-relative	Yes, if FMV > ₹50,000	Fair market value taxed	56(2)(x)(c)
Gift received on marriage	No — Fully Exempt	Any amount, any donor	56(2)(x) proviso (iii)
Inheritance / will	No — Fully Exempt	All assets, all amounts	56(2)(x) proviso (ii)
Gift from local authority / registered trust	No — Fully Exempt	Subject to conditions	56(2)(x) proviso (iv-vi)

Who Are "Specified Relatives" Under Section 56(2)(x)?

Gifts from the following relatives are always exempt, regardless of amount or asset type:

Relative	Examples
Spouse	Husband / Wife (note: income from gifted funds may be clubbed)
Siblings of the individual	Brother, Sister (including half-siblings)
Siblings of the spouse	Brother-in-law, Sister-in-law
Lineal ascendants	Parents, Grandparents, Great-grandparents
Lineal descendants	Children, Grandchildren
Lineal ascendants / descendants of spouse	Parents-in-law, Spouse's grandparents, Spouse's children from prior marriage
Spouses of all the above	Sibling's spouse, child's spouse, parent's sibling's spouse, etc.

How to Report Gifts in ITR

Taxable gifts must be reported under Schedule OS (Income from Other Sources). Exempt gifts from relatives should be disclosed in Schedule EI for transparency. There is no TDS on gifts — the payer does not deduct tax, and the responsibility lies entirely with the recipient to declare and pay tax.

The tax rate on taxable gifts is the applicable slab rate (no flat rate). When the gifted asset is later sold, the cost of acquisition for capital gains is the value that was taxed as income at the time of receipt — preventing double taxation.

Frequently Asked Questions

Is cash received as a gift from parents taxable?

No. Cash or any other gift received from parents is fully exempt from income tax. Parents are "specified relatives" under Section 56(2)(x) of the Income-tax Act, so gifts from them — regardless of amount — are not taxable in the recipient's hands. However, if parents gift money and the child invests it to earn income, the income earned from the gifted funds may be clubbed back with the parents' income under the clubbing provisions (Section 64).

Is gifting a property to a sibling taxable?

For the recipient: No, if the property is gifted by a sibling (brother or sister), since siblings are specified relatives under Section 56(2)(x) — the gift is fully exempt. For the donor (the one gifting): transferring property by way of gift is generally not a "transfer" for capital gains purposes and hence no capital gains tax arises at the time of gifting. However, when the recipient later sells the property, capital gains are computed using the original cost paid by the donor as the cost of acquisition.

Are gifts received by an HUF (Hindu Undivided Family) taxable?

Yes, the same Section 56(2)(x) rules apply to an HUF. Cash gifts received by an HUF from non-members exceeding ₹50,000 in a financial year are taxable as "Income from Other Sources." Gifts from HUF members or their relatives are exempt. A gift from an individual to the HUF of which they are a member is generally treated as a contribution to HUF capital and not taxed under Section 56(2)(x).

How do I distinguish between a gift and a loan for tax purposes?

A genuine loan must have repayment terms, interest (even if nominal), and ideally a written agreement. A "gift" that is actually a loan in disguise — with an expectation of repayment — will not qualify for the gift exemption. The tax department scrutinises large cash receipts from non-relatives. To be treated as a loan: maintain a written loan agreement, transact via banking channels, and repay with interest. A true gift has no repayment obligation and should ideally be documented with a gift deed.

Is a gift deed compulsory? Does a will-based inheritance attract gift tax?

A gift deed is not mandatory under the income tax law but is strongly advisable for large assets — it creates a clear record and protects against future disputes. For immovable property, a registered gift deed is legally required under the Transfer of Property Act. Inheritance received through a will or under intestate succession is specifically exempt from Section 56(2)(x) — there is no gift tax on inheritance, regardless of the value or whether the deceased was a relative.

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