Gift Tax in India 2025: Rules, Exemptions and Limits

Gift tax in India used to be a separate piece of legislation in 1958. The government abolished it in 1998 and then again introduced it in 2004 under the Income Tax Act for preventing tax evasion through spurious gift transactions. This tax is applicable where the total value of receiving gifts exceeds Rs. 50,000 in a financial year. Though giving and receiving gifts represent good will and affection, they also carry certain legal and financial implications in terms of taxation. Whether you are giving or receiving a gift, you need to understand the provisions that is governing gift tax in India for avoiding any unintended tax liabilities. Read the blog to know more. 

 What is Gift Tax?

Gift Tax in India is basically the tax applied on the transfer of property or assets from one individual to another individual without consideration or with nominal consideration. This includes giving a gift to a family member or a close friend. In simple terms we can say that it taxes the value of gifts given during one's lifetime. The gift can be anything. It can be in the form of money, real estate, movable assets like jewelry or vehicles. It can also be intangible assets like stocks or bonds.

Gift tax is not applicable on all types of gifts. It depends on multiple factors such as the value of the gift, the relationship between the donor (giver) and the recipient, and also whether the gift is falling under any specific exemptions as defined by law.

Gift Tax Under the Income Tax Act, 1961

Gift Tax in India is applicable under Section 56(2)(x) of the Income Tax Act, 1961. The Gift Tax Act, which existed until the year 1998, was repealed.  The Income Tax Act incorporated the provisions of gift taxation. In the present framework, gift tax is therefore indirect and it falls under the head of income under the Income Tax Act.

As per Section 56(2)(x), income tax applies to gifts received by an individual or Hindu Undivided Family (HUF) if the value of the gift exceeds a certain limit. The receiver of the gift will pay tax on the value of the gift, and the tax will be applicable under the head "Income from Other Sources."

Threshold Limit for Taxable Gifts

According to Section 56(2)(x) of the Income Tax Act, the government does not tax gifts that an individual or HUF receives, in case the total value of the gift is below a specified limit. As of the Financial Year (FY) 2023-24, the threshold limit for gift tax in India is Rs. 50,000.

• If the total value of gifts that one has received from one or more persons in a financial year exceeds Rs. 50,000, the entire value of the gift will add to the recipient's taxable income, and the recipient will have to pay tax on the amount that exceeds Rs. 50,000.

• For example, if you receive Rs. 60,000 in gifts during the year, the government will tax you on the entire amount.

Exemptions to Gift Tax

There are multiple exemptions under the Income Tax Act that allow individuals to avoid paying gift tax on certain kinds of gifts. These exemptions depend on the relationship between the donor and the recipient, and also the nature of the gift. Some of the key exemptions for the Gift Tax in India are:

Gifts Received from Relatives

Gifts received from relatives is the most important exemption under the Gift Tax in India. If you are receiving gifts from the following individuals, then it will be tax free regardless of the amount:

• Parents
• Siblings (brother or sister)
• Spouse
• Grandparents
• Uncles and aunts
• First cousins
• In-laws (father-in-law, mother-in-law, brother-in-law, and sister-in-law)

For example, if your brother has given you a gift of Rs. 1 lakh, it will not be subject to gift tax, as the tax law exempts gifts received from siblings.

Gifts Received on Special Occasions

If you are receiving gifts on special occasions such as weddings, birthdays, or festivals, they are also exempt from tax. This is because a relative gives the gift. The same rule applies to gifts received during ceremonies like a a marriage anniversary or child’s naming ceremony.

Gifts Received from a Will or Trust

If you are getting a property under a will or from a trust, that kind of gifts are also exempt from gift tax. In this case the exemption for Gift Tax in India applies irrespective of the relationship between the donor and the recipient.

Gifts from Charitable Organizations

Gifts received from registered charitable organizations are not subjected to gift tax. That kind of donations are eligible for Gift Tax in India under Section 80G of the Income Tax Act.

Gifts Received in the Form of Money or Property from a Government

If you are receiving any gift from the government (whether in the form of awards, honors, or grants), those are exempt from gift tax in India.

Gifts of Movable Property for Agricultural or Religious Purposes

The Indian government also exempts certain gifts used for agricultural or religious purposes from gift tax.

Tax Rates on Gifts

If an individual received gifts exceeding the Rs. 50,000 thresholds in a financial year and is not exempt, the recipient will have to pay tax on the value of the gift under the head “Income from Other Sources.” The tax rate that will be applied depends on the recipient’s income tax slab. Therefore, as per the current tax structure, the following rates will be applicable for Gift Tax in India:

Therefore, if you have received a gift of Rs. 1 lakh and fall in the 20% tax slab, you will have to pay Rs. 20,000 as tax on the gift.

How to Report Gifts in Your Tax Return?

Gifts which exceed the Rs. 50,000 threshold limit, should be reported in your Income Tax Return (ITR). The process involves including the value of the gift under "Income from Other Sources” in your income tax. The value of the gift must be declared at market value, and the recipient need to ensure that all documentation related to the gift is retained, such as bank statements, gift deeds, or letters from the donor. It will help in avoiding any issues during assessment.

(a)   Gifts in the Form of Property or Assets

When you are receiving a gift in the form of property (immovable or movable) such as real estate or jewelry, the process will be more complicated. This is because the market value of the property is considered for determining whether the gifts exceeds Rs. 50,000.

• Real Estate: If you receive property as a gift, then it will be valued depending on the fair market value. In the case of immovable property, the stamp duty value will be considered for calculating the value of the gift.
• Jewellery or Movable Assets: Similarly, if jewellery, cars, or other valuables are gifted, then their market value will be considered for tax purposes.

However, in some cases, if the recipient is selling the gifted property later, capital gains tax will be applied depending on the increase in the property’s value since the time of the gift.

(b)  Gifts from Non-Residents and NRIs

Gifts that are received Non-Residents and Non-Resident Indians (NRIs) are also subject to the same rules of Gift Tax in India. If a gift receiving from an NRI exceeds the Rs. 50,000 thresholds, then it will be taxable in India, and the recipient will have to report it in their Income Tax Return.

However, the key difference is that if you are receiving the gift from a non-relative or from a non-resident, the burden of proof of relationship will fall on the recipient in case the donor claims exemption as a relative.

(c)   Penalties for Non-Compliance

When a taxpayer fails to disclose gifts received in their tax return or tries to remove tax on a taxable gift, it might subject to penalties. Under the Income Tax Act, penalties for non-compliance will range from Rs. 10,000 to Rs. 1 lakh, as per the severity of the violation. Deliberate concealment of gift transactions can lead to imprisonment in extreme cases.

Conclusion

Thus we can say that one need to be aware about the financial responsibilities associated with gifting. Understanding the provisions of gift tax in India will help one to take the right decision about gifting money, property, or assets. On getting gifts from relatives normally or on certain special occasions are exempt from tax. In case if the gift is exceeding a particular amount, it is pay the specified taxes applicable on it. You need to stay updated about these tax rules in order to ensure that you are staying compliant with tax laws.

FAQ

Q1. What are considered as Gift under the Income Tax Act?

Gifts defines as any amount of money or a property (movable or immovable) that are received without consideration or for inadequate consideration. For example, an amount of money like cash, cheques, drafts, bank transfers, immovable property like land, buildings and movable properties like shares, securities, jewellery, etc.

Q2. When Gifts Are Taxable?

If the total value of gifts that you have received in a financial year exceeds Rs. 50,000, then it will be taxable. In case the aggregate value exceeds Rs. 50,000 the entire amount is taxable. However, for property bought for less than fair market value, the difference of the fair market value and the price paid will be taxable.

Q3. Will a gift worth Rs. 2 Lakhs from my sister will be taxable?

Sister is a relative of yours as per the income tax act and thus receiving gift from the sister will be non-taxable.

Q4. Are Gifts Received for Marriage Exempt?

As per the Income Tax Act, gift received by a couple for marriage except those that are received in cash a sum of Rs. 2 Lakhs or more is exempt under Section 269ST.age.

Q5. Is Receiving Gift from a Friend Taxable?

Yes, receiving gift from a friend that exceeds RS. 50,000 is taxable. But receiving gifts less than Rs. 50,000 is tax free.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Online Legal India is a digital platform. If you require legal assistance, we strongly recommend consulting a qualified lawyer or law firm.