According to tax experts, gifts received from certain relatives are exempt from tax in India under the Income-tax Act, 1961, regardless of the amount involved or the mode of transfer. As reported by Mint, this exemption applies to gifts from lineal ascendants or descendants of the individual receiving the gift. The term 'relative' includes any lineal ascendant or descendant of the individual, with judicial precedents supporting that this includes both maternal and paternal relatives.
For non-resident Indians, the taxability of gift transactions is determined based on the law applicable during the relevant financial year in which the transaction took place. According to Mint, since the gift transaction under consideration was undertaken during FY 2025-26, the provisions of Income-tax Act 1961 would apply. This means that gifts from grandparents would not be taxable in India for NRIs, provided they meet the relative definition criteria.
Tax experts recommend maintaining supporting documentation for gift transactions, including bank transfer records and a simple gift declaration or confirmation from the donor. As reported by Mint, this documentation serves as record-keeping purposes and helps establish the tax-exempt nature of the transaction. The documentation should clearly show that the gift was voluntary, without any expectation of repayment or consideration involved. For gold specifically, maintaining family records, gift letters, or bank statements showing the original purchase date can provide crucial evidence of legitimate ownership.
The Income-tax Act 2025 has now specifically clarified that lineal ascendants and descendants include both maternal and paternal relatives, removing any ambiguity that existed under the earlier law. According to Mint, this amendment provides greater certainty to taxpayers receiving gifts from family members on either side of the family. The new legislation ensures that taxpayers can claim tax exemption on gifts from grandparents without worrying about legal interpretations. For gold specifically, the CBDT has established safe limits of 500g, 250g, and 100g for different categories, but these are not ownership ceilings - they protect against seizure without proper documentation.
