Gift tax is one of the most misunderstood areas of income tax in India. Many taxpayers assume that receiving money, property, or valuable items as a gift is always tax-free, while others believe every gift attracts tax. Under the Income Tax Act, 1961, as applicable for Financial Year 2025-26, gift taxation is governed by specific provisions that clearly define when a gift is taxable, when it is exempt, and how it should be reported. Importantly, the introduction of the new income tax regime has not changed the rules related to gift taxation. The same provisions apply under both the old and new tax regimes. This article explains gift tax in detail under the Income Tax Act 2025, including taxable gifts, exemptions, valuation rules, and practical examples to help taxpayers understand their obligations.
Gift tax in India is covered under Section 56(2)(x) of the Income Tax Act. According to this provision, if any person receives certain assets without consideration or for inadequate consideration, the value of such assets may be treated as income and taxed under the head “Income from Other Sources.” The tax liability arises in the hands of the recipient, not the giver. This rule applies to individuals as well as Hindu Undivided Families.
A gift can take several forms under tax law. It may be cash, movable property such as jewellery, shares, securities, paintings, or immovable property such as land or building. The taxability depends on the nature of the gift, its value, the relationship between the giver and the recipient, and the occasion on which it is received.
Cash gifts include money received in cash, cheque, bank transfer, UPI, or any other monetary mode. If an individual receives cash gifts from one or more persons during a financial year and the total value exceeds ₹50,000, the entire amount becomes taxable. It is important to note that this is not a threshold exemption. Once the limit of ₹50,000 is crossed, the full amount is taxed, not just the excess.
For example, if a person receives ₹30,000 from a friend in June and ₹25,000 from another friend in December, the total cash gifts amount to ₹55,000. Since this exceeds ₹50,000, the entire ₹55,000 becomes taxable as income. If the total had been ₹50,000 or less, it would have been fully exempt.
Movable property gifts include items such as jewellery, shares, securities, drawings, paintings, sculptures, bullion, and other valuable articles as notified by the government. If movable property is received without consideration and its fair market value exceeds ₹50,000, the entire fair market value is taxable. If the property is received for inadequate consideration and the difference between the fair market value and the amount paid exceeds ₹50,000, then the difference is taxed.
For example, if a person receives jewellery worth ₹2,00,000 as a gift from a non-relative, the entire ₹2,00,000 becomes taxable. If the same jewellery is purchased for ₹1,20,000 while its fair market value is ₹2,00,000, the difference of ₹80,000 is taxable since it exceeds ₹50,000.
Immovable property includes land or building or both. The taxation rules differ slightly for immovable property. If immovable property is received without consideration and its stamp duty value exceeds ₹50,000, the entire stamp duty value is taxable. If the property is received for inadequate consideration and the difference between the stamp duty value and the consideration paid exceeds the higher of ₹50,000 or 10 percent of the consideration, then the difference is taxable.
For example, if a person receives a plot of land as a gift from a friend and the stamp duty value is ₹15,00,000, the entire ₹15,00,000 becomes taxable income. If a flat with a stamp duty value of ₹50,00,000 is purchased for ₹44,00,000, the difference is ₹6,00,000. Since this exceeds both ₹50,000 and 10 percent of the consideration, the difference becomes taxable.
One of the most important aspects of gift taxation is the exemption available for gifts received from relatives. The Income Tax Act defines “relative” in a specific manner. For an individual, relatives include spouse, parents, children, siblings, spouse’s siblings, siblings of parents, lineal ascendants and descendants of the individual or spouse, and spouses of the above persons. Gifts received from these relatives are fully exempt, regardless of the amount or nature of the gift.
For example, if a father gifts ₹25,00,000 to his daughter, the entire amount is tax-free in the hands of the daughter. Similarly, if a husband gifts jewellery worth ₹10,00,000 to his wife, no gift tax applies. However, while the gift itself may be tax-free, income generated from the gifted asset may be subject to clubbing provisions in certain cases, especially between spouses and minor children.
Gifts received on the occasion of marriage are fully exempt, irrespective of the amount or the person giving the gift. This exemption applies only to the individual getting married, not to other family members. For instance, gifts received by a bride or groom at their wedding are not taxable, even if they amount to several lakhs or crores. However, gifts received by parents or siblings during the wedding are not covered by this exemption unless the giver qualifies as a relative.
Gifts received under a will or by way of inheritance are also fully exempt from tax. This includes property, cash, or any other asset received after the death of a person as per a will or succession law. Similarly, gifts received in contemplation of death of the payer are exempt. These provisions ensure that inheritance does not attract income tax in the hands of the recipient.
Gifts received from local authorities, charitable trusts registered under the Income Tax Act, or certain specified funds and institutions are also exempt. However, the recipient must ensure that the trust or institution is properly registered and compliant with tax laws.
Under the new income tax regime for FY 2025-26, gift tax rules remain unchanged. The choice of tax regime does not affect the applicability of Section 56(2)(x). Any taxable gift must be added to the total income and taxed according to the slab rates applicable under the chosen regime. No special deduction or exemption is available for taxable gifts under the new regime.
Valuation of gifted assets plays a critical role in determining tax liability. For movable property, valuation is generally done based on fair market value as per prescribed rules. For immovable property, stamp duty value is used. Taxpayers should maintain proper documentation such as gift deeds, valuation reports, bank statements, and relationship proofs to substantiate the nature and source of gifts in case of scrutiny.
Another important area is reporting of gifts in the income tax return. Taxable gifts must be reported under “Income from Other Sources.” Exempt gifts are not taxable but may still need to be disclosed in the return, especially if they involve high-value transactions such as property or large cash transfers. Proper disclosure helps avoid notices and penalties.
Penalties may apply if taxable gifts are not reported correctly. If the income is concealed or inaccurately reported, penalty and interest may be levied under the Income Tax Act. Therefore, transparency and correct reporting are essential.
In practical tax planning, gifts can be an effective tool for wealth transfer within families when done correctly. Gifting assets to relatives can help distribute income, support dependents, and manage estate planning without immediate tax impact. However, taxpayers must be cautious about clubbing provisions, stamp duty costs, and future capital gains implications when the gifted asset is sold.
LIST OF TAX FEE GIFT IN F.Y. 2025-26
| Type of Gift Received | Who Gives the Gift | Value Limit | Tax Status | Explanation |
|---|---|---|---|---|
| Cash / Money | Any person | Up to ₹50,000 (total in a year) | Tax-Free | If total cash gifts do not exceed ₹50,000 in a financial year |
| Cash / Money | Relative | No limit | Tax-Free | Any amount received from specified relatives is fully exempt |
| Movable Property (jewellery, shares, securities, paintings, etc.) | Relative | No limit | Tax-Free | Fair market value does not matter if giver is a relative |
| Immovable Property (land or building) | Relative | No limit | Tax-Free | Stamp duty value is ignored for relatives |
| Any Gift | On the occasion of marriage | No limit | Tax-Free | Applies only to the bride or groom |
| Any Gift | Received under a will | No limit | Tax-Free | Inheritance is fully exempt |
| Any Gift | Received by inheritance | No limit | Tax-Free | Includes ancestral and self-acquired property |
| Any Gift | In contemplation of death | No limit | Tax-Free | Gift given due to expectation of donor’s death |
| Any Gift | Local authority | No limit | Tax-Free | Includes government and municipal bodies |
| Any Gift | Registered charitable trust or institution | No limit | Tax-Free | Trust must be approved under Income Tax Act |
| Movable Property | Any person | Fair market value up to ₹50,000 | Tax-Free | Total value must not exceed ₹50,000 |
| Cash / Money | Multiple persons | Total up to ₹50,000 | Tax-Free | Aggregate limit applies in a financial year |
List of Gifts Received – Tax Payable and Amount (FY 2025-26)
| Type of Gift Received | From Whom | Gift Value / Difference | Taxable Amount | Tax Payable |
|---|---|---|---|---|
| Cash / Money | Non-relative | ₹50,000 or less | Nil | No tax |
| Cash / Money | Non-relative | Above ₹50,000 | Entire amount | Tax as per income slab |
| Cash / Money | Relative | Any amount | Nil | No tax |
| Jewellery / Shares / Other Movable Property | Non-relative | Fair market value up to ₹50,000 | Nil | No tax |
| Jewellery / Shares / Other Movable Property | Non-relative | Fair market value above ₹50,000 | Entire fair market value | Tax as per income slab |
| Movable Property (Bought cheap) | Non-relative | FMV – Purchase price exceeds ₹50,000 | Difference amount | Tax as per income slab |
| Land / Building (Gifted) | Non-relative | Stamp duty value above ₹50,000 | Entire stamp duty value | Tax as per income slab |
| Land / Building (Bought cheap) | Non-relative | Stamp duty value – price paid exceeds ₹50,000 and 10% | Difference amount | Tax as per income slab |
| Any Property | Relative | Any value | Nil | No tax |
| Any Gift | On marriage | Any value | Nil | No tax |
| Any Property | Through will / inheritance | Any value | Nil | No tax |
| Any Gift | From friends (multiple) | Total above ₹50,000 | Entire total | Tax as per income slab |
Conclusion,
Gift tax under the Income Tax Act 2025 is governed by clear and well-defined rules. While gifts are not taxed separately, they can become taxable as income if certain conditions are met. Understanding who qualifies as a relative, the ₹50,000 threshold, exemptions for marriage and inheritance, and valuation rules is crucial for correct tax compliance. Since the new tax regime does not alter gift taxation, taxpayers under both regimes must follow the same provisions. With proper planning, documentation, and disclosure, individuals can receive and give gifts without unnecessary tax burden while staying fully compliant with the law.