Gifts exceeding ₹50,000 are taxable under the Income Tax Act as income from other sources, according to reports from Mint. Under existing income tax rules, gifts with a total value of up to ₹50,000 in a financial year are entirely exempt from tax, even if received from friends. The tax treatment depends on the value of the gift, the relationship between the donor and recipient, and the nature of the transaction. Under ITA 2025, gifts received are taxable under 'Income from Other Sources' in three scenarios.
Certain gifts received by an individual from another person or people may attract gift tax under the income tax rules, but tax does not apply in some specified situations, irrespective of who gives the gift. As reported by Mint, these include gifts received on the occasion of an individual's marriage, gifts received under a will or by way of inheritance, gifts received in contemplation of death of donor or payer, and gifts received during the distribution of capital assets on total or partial partition of a Hindu Undivided Family (HUF), where the exemption applies only to HUF members.
Similar tax exemption applies to gifts received from family members and certain people and authorities, according to Mint reports. Under ITA 2025, 'relatives' are specifically defined as brother or sister of the individual, brother or sister of the spouse, brother or sister of either parent, any lineal ascendant or descendant of self or spouse and spouse of any of the relatives. The exemption also covers gifts received from local authorities such as Village Panchayat, Municipality, Municipal Committee and District Board, as well as Cantonment Board. Friends, colleagues, and distant relatives are NOT on this list — their gifts are taxable if aggregate exceeds ₹50,000. For gifts received as shares from specified relatives, the gift is not taxable in the recipient's hands under Section 56(2)(x) of the Income Tax Act. When the recipient later sells those shares, the cost of acquisition is deemed to be the donor's original cost under Section 49(1), and the donor's holding period is included when determining whether the gain is short-term or long-term.
As reported by Mint, gifts received from any fund, foundation, university or other educational institutions, hospital or other medical institution qualify for exemption. The exemption applies to any trust or institution referred to Section 10(23C). Additionally, gifts received from any charitable or religious trust registered under section 12A or section 12AA are exempt from tax. Gifts received from a trust created or established solely for the benefit of relatives of the individual may also qualify for exemption, subject to conditions under the Income Tax Act.
If a person receives gifts from someone who does not fall within the list of specified relatives or exempt categories, the gift may become taxable under current Income Tax rules, according to Mint. In such cases, the receiver is required to disclose the gift in their Income Tax Return (ITR) and make appropriate tax payments. The value of such gift must be declared while filing ITR under the head 'Income from Other Sources'. The taxable value of the gift is added to the total income of the receiver for the relevant financial year, and the tax liability is calculated according to the applicable income tax slab rates of the receiver. Under ITA 2025, clubbing provisions apply where if a person gives money or assets to their spouse (without adequate consideration) or to a minor child, the income generated from those gifted assets is clubbed with the donor income under Sections 97-99 of ITA 2025. For unlisted shares, capital gains are reported in Schedule CG under Section 112 in ITR-2 or ITR-3, with the entire LTCG on unlisted shares taxable at 12.5% flat rate without indexation benefits.
