Taxation of Gifts — Money & Property Received Without Consideration

Relevant Provision: Section 92(2)(m)

Section 92(2)(m) taxes gifts received by any person in three categories: (A) sum of money without consideration, where the aggregate received during the year exceeds ₹50,000 — the entire sum (not just the excess) is taxable; (B) immovable property received without consideration (stamp duty value exceeding ₹50,000 → entire SDV taxable) or for inadequate consideration (difference exceeding the higher of ₹50,000 or 10%/20% of consideration, as applicable); and (C) specified movable property (shares/securities, jewellery, archaeological collections, drawings, paintings, sculptures, any work of art, bullion, and virtual digital assets) received without or for inadequate consideration beyond the ₹50,000 threshold.

2. Taxability

Once a gift crosses the relevant ₹50,000 threshold and does not fall within an exemption, the entire amount (for money gifts) or the entire value/excess (for property) is added to the recipient's total income and taxed at slab rate — it is not a flat-rate item, unlike lottery winnings.

3. Complete List of Exemptions

Gifts are not taxable if received: (1) from a "relative" (spouse; siblings of self/spouse; siblings of either parent; any lineal ascendant/descendant of self or spouse; spouses of all the above; for a HUF, any member of the family); (2) on the occasion of the individual's marriage; (3) under a will or inheritance; (4) in contemplation of death of the payer/donor; (5) from a local authority; (6) from/by a registered non-profit organisation, subject to conditions; (7) by way of a transaction not regarded as transfer (specified corporate reorganisations); (8) from an individual to a trust created solely for the benefit of relatives; and (9) from such class of persons/subject to conditions as may be prescribed.

4. Valuation Mechanics for Immovable Property

If the date of agreement (fixing consideration) differs from the date of registration, the SDV as on the agreement date applies — but only if at least part of the consideration was paid via specified banking/online mode on or before the agreement date. If the assessee disputes the SDV, the Assessing Officer may refer the matter to a Valuation Officer.

5. Illustrative Examples

Example A (money gift): Ms. Nair receives ₹30,000 from a colleague and ₹25,000 from a family friend in the same year — aggregate ₹55,000, which exceeds ₹50,000, so the entire ₹55,000 becomes taxable, not just the ₹5,000 excess.

Example B (immovable property, inadequate consideration): Mr. Das buys a flat with a stamp duty value of ₹80 lakh for a stated consideration of ₹65 lakh. The difference (₹15 lakh) exceeds the higher of ₹50,000 or 10% of consideration (₹6.5 lakh), so the excess of ₹15 lakh is taxable in Mr. Das's hands under Other Sources.

Example C (exempt gift): Mr. Das's father gifts him ₹20 lakh in cash to help buy the flat. Since a father is a "relative" as statutorily defined, this ₹20 lakh gift is fully exempt regardless of amount — though the income later earned by investing surplus funds would be taxed normally in Mr. Das's own hands (no clubbing applies for gifts from a parent to an adult child).

6. Precautions

Document every gift, however small, especially from relatives — a simple gift deed or letter recording the relationship, date, and amount protects against future scrutiny.

Be careful with gifts from extended family/friends who are not statutorily "relatives" — many close relationships (e.g., father-in-law's brother, or a friend "like family") do not fall within the definition.

For property received for inadequate consideration, obtain an independent valuation/stamp-duty ready-reckoner check before finalising the deal.

Crypto/VDA gifts are explicitly covered — do not assume digital assets escape the gift-tax net merely because they are intangible.

Engagement, anniversary, and birthday gifts do not enjoy the marriage exemption — only gifts on the occasion of one's own marriage are exempt.

7. Case Laws

CIT v. P. Mohanakala (2007) SC — even where the identity of the donor and mode of payment are established, if genuineness and creditworthiness of the gift are not proved, it can be added as unexplained income.

Chandrakant H. Shah v. ITO and similar ITAT rulings — held that gifts received from a HUF are not covered by the "relative" exemption in the hands of an individual member (a contested area — seek professional advice).

CIT v. Sunil Kumar Sood — reiterated that mere banking channel transactions do not automatically validate a gift; genuineness of the underlying relationship/occasion is separately tested.

8. FAQs

Q1. Are gifts received from friends completely tax-free up to ₹50,000?

Yes — any gift from a non-relative up to an aggregate of ₹50,000 in a year is tax-free; the moment the aggregate crosses ₹50,001, the entire amount becomes taxable.

Q2. Is money received from parents always tax-free?

Yes, gifts from parents are fully exempt regardless of amount, provided the source and genuineness of the parent's funds can be substantiated if questioned.

Q3. Do I need to pay tax if I receive a gift from my spouse?

No, spouse is a specified relative, so such gifts are exempt from gift tax. However, clubbing provisions may still apply to any income earned from the gifted asset.

Q4. Are wedding gifts from non-relative friends of the couple fully exempt?

Yes — the marriage exemption applies to gifts received on the occasion of one's own marriage, from anyone.

Disclaimer

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