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While you can receive gifts of any amount from your relatives without paying income tax on it, gift(s) valued above Rs. 50,000 received from a non relative is taxable in the hands of the recipient. If you receive more than Rs. 50,000 during a financial year without any consideration, the entire sum of which the gifts are worth, is taxable. The limit of Rs. 50,000, which provides for liability of income tax on gift, is irrespective of the number of people from whom you have received the money. For example, if you received Rs. 10,000 each from six non-relatives, you will have to pay income tax on the entire sum of Rs. 60,000.
Income Tax on Gift in Kind and Cash
Gifts received in kind, such as property, paintings, bonds, debentures and jewelry without consideration is also taxable. If you are gifted a painting worth Rs 2 lakhs, it will be included in your income and taxed as per your slab. However, if a property is received on consideration, which is less than stamp duty value, it will not be included in your income.
No Income Tax on Gift Received from Relatives
The term “relative” includes:
• Spouse
• Brother or sister
• Brother or sister of the spouse
• Brother or sister of either of the parents of
the individual
• Any lineal ascendant or descendent
• Any lineal ascendant or descendent of the
spouse
• Spouse of the person referred to in (2) to (6)
A lineal descendant is a person who is in direct line to an ancestor: child, grandchild, great grandchild and so on. Similarly, a lineal ascendant could be parent, grandparent, and great-grandparent and so on. Hence gift from father, mother, brother, sister, father-in-law, mother-in-law, brother-in-law, sister-in-law, etc. will not attract any income tax.
Grand parents can give tax free gifts. Avoid gifts from mother’s father/mother (Nana/Nani) as these are not tax free. There are debates on treating them as lineal ascendants. If you gift money or an asset to your daughter-in-law, income from that money or asset will be clubbed to your income.
