Income Tax Act 2025: Gift Tax Provisions, Exempt Relatives and Gifts

Gift Tax under the New Income Tax Act, 2025: Tax-Free Gifts and Relatives Explained

The New Income Tax Act, 2025 introduces Section 92, which governs the taxation of gifts received by individuals, Hindu Undivided Families (HUFs), and other persons. This provision replaces the earlier Section 56(2)(x) of the Income Tax Act, 1961 and offers a more organised and comprehensive framework for taxing gifts involving money, movable assets and immovable property.

In India, every gift is not taxable. Whether a gift attracts tax depends on several factors, including:

• The value of the gift

• The relationship between the giver and the recipient

• The nature of the asset received

• The occasion on which the gift is received (marriage, inheritance, will, etc.)

This guide explains the scope of Section 92, covering taxable situations, exemptions, valuation rules, clubbing provisions and practical examples.

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Meaning of Gift under Section 92

Under Section 92, a gift includes money, movable property or immovable property received:

• Without consideration, or

• For inadequate consideration

If the value of such gift exceeds ₹50,000, it becomes taxable as income, unless it qualifies for an exemption specified under Section 92(3).

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When Are Gifts Taxable? (Section 92(2)(m))

1. Monetary Gifts from Non-Relatives

If total cash or monetary gifts received from non-relatives exceed ₹50,000 in a financial year, the entire amount becomes taxable.

Example:
₹20,000 from one friend + ₹40,000 from another friend
Total = ₹60,000 → Fully taxable

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2. Immovable Property (Land or Building)

a) Received without consideration
If the stamp duty value (SDV) exceeds ₹50,000, the entire SDV is taxable.

b) Received for inadequate consideration
The difference between SDV and actual consideration is taxable if it exceeds:

• ₹50,000, or

• 10% of consideration (whichever is higher)

Example:
SDV: ₹50 lakh
Purchase price: ₹44 lakh
Difference: ₹6 lakh → Taxable

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3. Movable Property (Jewellery, Shares, Bullion, Crypto, etc.)

a) Without consideration
If fair market value (FMV) exceeds ₹50,000, the full FMV is taxable.

b) With inadequate consideration
If FMV minus consideration exceeds ₹50,000, the difference is taxable.

Example:
Jewellery FMV ₹2,00,000 bought for ₹1,30,000
Difference ₹70,000 → Taxable

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Gifts That Are Fully Exempt (Section 92(3))

A. Gifts from Relatives (No Limit)

For individuals, “relative” includes:

• Spouse

• Parents, grandparents and other lineal ascendants

• Children, grandchildren and other lineal descendants

• Siblings of self, spouse or parents

• Lineal ascendants/descendants of spouse

• Spouses of all the above relatives

For HUFs, any member of the HUF is treated as a relative.

👉 Gifts from relatives are fully exempt, irrespective of amount.

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B. Gifts Received on Marriage of the Individual

All gifts received on the occasion of one’s own marriage are tax-free, regardless of value or source.
This exemption does not apply to anniversaries or relatives’ marriages.

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C. Gifts Received through Will or Inheritance

Assets received by way of inheritance or under a will are completely exempt from tax.

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D. Gifts in Contemplation of Death

Gifts given in anticipation of the donor’s death are exempt.

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E. Gifts from Local Authorities

Exempt as per Schedule III.

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F. Gifts from Registered Charitable or Non-Profit Institutions

Allowed under Section 355(g), subject to prescribed conditions.

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G. Transactions Not Regarded as Transfer (Section 70)

Gifts arising from amalgamation, demerger or business restructuring are exempt.

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H. Gifts to Trusts for Benefit of Relatives

Transfers made to trusts exclusively for relatives’ benefit are tax-free.

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Special Provisions for Immovable Property (Section 92(4))

If the agreement date and registration date differ, the stamp duty value as on the agreement date may be considered, provided payment is made through banking or digital modes.

If stamp duty value is disputed, the Assessing Officer may refer valuation to a Valuation Officer.

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Assets Covered under “Property” (Section 92(5)(f))

• Land or building

• Shares and securities

• Jewellery

• Paintings, sculptures, artworks

• Archaeological collections

• Bullion

• Virtual Digital Assets (cryptocurrency, NFTs)

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Clubbing of Income from Gifted Assets

While Section 92 taxes the receipt of gifts, income generated from gifted assets is taxed under clubbing provisions.

Example:
Cash gifted to spouse → Gift exempt
Interest earned → Clubbed in donor’s income

Similar rules apply to gifts to minor children.

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Employer Gifts

Gifts from employers are taxed as salary perquisites.
Only long-service awards up to ₹5,000 are exempt.

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Capital Gains on Sale of Gifted Property

• Cost of acquisition = FMV considered at time of gift

• Holding period starts from date of receipt

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Documentation for Gifts

Acceptable proof includes:

• Bank transfer records

• Gift deed (optional but advisable)

• Marriage invitation and gift list

• Photographs and source explanation

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Practical Examples

• Gift from father ₹10 lakh → Exempt

• Jewellery from friend ₹1 lakh → Taxable

• Flat from paternal uncle → Exempt

• Cash gift on marriage ₹5 lakh → Exempt

• Undervalued land purchase → Difference taxable since she is the spouse of the father under the Income Tax Act.
  Accordingly, any gift received from her is fully exempt from tax, irrespective of the amount.