Gifts are often exchanged during special occasions such as weddings, birthdays, or festivals in India. While they symbolise goodwill and affection, gifts of high value—especially those involving money or property—are subject to specific tax rules. The Income Tax Act lays out detailed provisions that determine when such gifts become taxable. Understanding the tax on gifts in India is essential to ensure correct reporting and avoid any compliance issues.
What is Gift Tax in India?
Gift tax in India refers to the tax imposed on the value of certain gifts received without adequate consideration. While the original Gift Tax Act was introduced in 1958 and discontinued in 1998, gift tax provisions were reintroduced under Section 56(2) of the Income Tax Act in 2004.
Currently, gift tax is not governed by a separate law. Instead, gifts are taxed under the head “Income from Other Sources.” Common taxable gifts include cash, cheques, jewellery, land, buildings, and shares. The value of such gifts is added to the recipient’s income and taxed as per the applicable income tax slab. This integration into regular income taxation makes it important to know what is gift tax and its practical implications.
Gift Taxation Rules in India
Gifts are taxed if their value exceeds specified limits, depending on the nature of the asset. The table below outlines the conditions under which gifts become taxable:
Type of Gift
| Condition
| Taxable Value
|
Cash gifts taxable without consideration
| If value exceeds ₹50,000
| Entire amount is taxable
|
Immovable property without consideration
| If stamp duty exceeds ₹50,000
| Stamp duty value is taxable
|
Immovable property with low consideration
| Difference between stamp duty and price exceeds ₹50,000
| Difference is taxable
|
Valuables like jewellery or shares without payment
| Fair market value exceeds ₹50,000
| Entire FMV is taxable
|
Movable property with low payment
| FMV exceeds purchase price by over ₹50,000
| Difference is taxable
|
The gift tax rate in India is not fixed. It is based on the individual’s income tax slab since the amount is included in total taxable income.
Gift Tax Exemptions in India
Not all gifts are taxed. Certain categories are exempt under specific conditions provided in the Income Tax Act. The table below summarises key exemptions:
Giver
| Receiver
| Reason for Exemption
|
Relative
| Individual
| Gifts from relatives are not taxed
|
Any individual
| Individual
| Gifts received on the occasion of marriage are exempt
|
Any person
| Any individual
| Gifts received via a Will or inheritance are exempt
|
Trust
| Relative
| If the trust is created for the benefit of relatives
|
Any person
| Local authority, registered charitable trust, or entity under Section 10
| Fully exempt
|
HUF member
| HUF
| Assets transferred within the family HUF setup are exempt
|
Understanding these exemptions helps in ensuring that only applicable gifts are reported and taxed appropriately.
How to Calculate the Taxable Value of a Gift?
The taxable value of a gift depends on its type and condition. The table below shows how different gift types are assessed:
Type
| Condition
| Taxable Value
|
Cash, cheque, or online transfer
| Value exceeds ₹50,000
| Entire value is taxable
|
Immovable property without payment
| Stamp duty value exceeds ₹50,000
| Full stamp duty value is taxable
|
Immovable property underpaid
| Difference exceeds ₹50,000
| Difference is taxable
|
Valuables without payment
| FMV exceeds ₹50,000
| Entire FMV is taxable
|
Valuables with low payment
| Difference exceeds ₹50,000
| Difference is taxable
|
The gift tax percentage in India corresponds to the individual’s tax slab. There is no fixed gift tax rate, so the actual tax impact varies depending on the total income.
How to Declare Gift Tax in India?
Gifts that qualify as taxable must be reported in the annual income tax return (ITR). Here’s a step-by-step guide:
Calculate taxable value
Add the total value of gifts received during the financial year that cross the threshold.
Check exemptions
Remove the value of gifts that are exempt under the law.
Include in ITR
Report the taxable gifts under the head “Income from Other Sources.”
Compute applicable tax
Add this value to your total income and determine the tax liability based on your slab.
Pay tax along with regular income tax
Ensure timely payment and correct reporting to avoid penalties.
Failure to report taxable gifts may lead to scrutiny or penal action from the income tax authorities.
Stamp Duty Rules Applicable to Gift Tax
Stamp duty plays a key role in determining taxability in case of property-related gifts. Here are some applicable rules:
Agreement vs. Registration Date
If payment is made before the date of agreement, the stamp duty of the agreement date is considered for valuation.
Disputed Valuation
If you disagree with the stamp duty value, the case can be referred to a Valuation Officer for review.
Section 56(2)(x) Relaxation
If the difference between stamp duty value and the actual sale price is within 10%, it may not attract gift tax.
These guidelines are important to ensure that valuation disputes are minimised and reporting remains accurate.
How to Use Gifts for Saving Taxes?
Gifts that qualify under exemptions provided in the Income Tax Act do not attract tax. For example, gifts received from relatives or on your wedding day are not considered taxable. Similarly, gifts received through a valid Will or as inheritance are fully exempt.
However, it is important to maintain proper documentation such as bank transfers, gift deeds, or signed declarations to establish the genuineness of a gift. These records can be useful if there is ever a need for clarification during income tax assessments.
Knowing the gift tax meaning and understanding how exemptions apply ensures compliance with the law and helps in accurate income tax return filing.
Conclusion
The tax on gifts in India becomes applicable when the combined value of gifts received during a financial year exceeds ₹50,000. Gift tax in India applies to various forms of assets such as money, property, and jewellery, unless specific exemptions are met. The gift tax rate in India is based on your individual tax slab, and proper reporting through your income tax return is essential. Being aware of the valuation rules and exemption categories helps maintain tax compliance.
