Income Tax on Gifts Explained: Know the only occasion when you don't pay tax on monetary gifts

Income Tax on Gifts: Wondering whether the gift you received recently is taxable or not? This explainer will help you. The Income Tax rules classify gifts into five categories: a)  Monetary gift, or the sum of money received without consideration; b) ‘gift of movable property’, that is specified movable properties received without consideration; c) ‘movable property received for less than its fair market value’. These are specified movable properties received at a reduced price; d) ‘gift of immovable property’, that is immovable properties received without consideration; e) ‘immovable property received for less than its stamp duty value’, that is immovable properties acquired at a reduced price. 

The Income Tax rules say that monetary gifts received by an individual or a Hindu Undivided family (HUF) become taxable when the sum of money is received without consideration and the aggregate value of such sum of money received during the year exceeds Rs 50,000.

Exceptions: In the following cases, the monetary gift received by an individual or HUF is not charged for tax when:

1. Money is received from relatives. Here, "Relative" means:
i. In case of an Individual
a.Spouse of the individual;
b.Brother or sister of the individual;
c.Brother or sister of the spouse of the individual;
d.Brother or sister of either of the parents of the individual;
e.Any lineal ascendant or descendant of the individual;
f. Any lineal ascendant or descendant of the spouse of the individual;
g.Spouse of the persons referred to in (b) to (f).

ii. In case of HUF, any member thereof. 

2. Money received on the occasion of the marriage of the individual.
3) Money received under will/by way of inheritance.
4) Money received in contemplation of death of the payer or donor.
5) Money received from a local authority.
6) Money received from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in section 10(23C) of the Income Tax Act..
7) Money received from a trust or institution registered under section 12AA.
8) Share received as a consequence of demerger or amalgamation of a company under clause (vid) or clause (vii) of section 47, respectively.
9) Share received as a consequence of business reorganization of a co-operative bank under section 47(vicb).

Tax on the gift received during the marriage

The Income Tax rules say that "Marriage of the individual is the only occasion when monetary gift received by him will not be charged to tax."

The gift received on the occasion of the marriage of the individual is not charged to tax. Apart from marriage, there is no other occasion when monetary gift received by an individual is not charged to tax. So, if you receive monetary gift received on occasions like birthday, anniversary, etc, it will be charged to tax.

Monetary gifts received from friends are charged to tax. 

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Monetary gifts received from abroad are charged to tax if the aggregate value of monetary gift received during the year by an individual or HUF exceeds Rs. 50,000 and the gifts are not covered under the exceptions discussed in earlier.

All gifts are charged to tax when the aggregate value of gifts received during the year exceeds Rs. 50,000.