Tax on Gifts in India

For taxation purposes a “gift” refers to money or property (movable or immovable) that is received by a person from another individual or entity without providing any payment (without consideration) or providing nominal payment (inadequate consideration) in return.

Earlier gift tax in India was governed by Gift Tax Act, 1958, however it was later abolished and its provisions were included in Income Tax, 1961. With the new Income Tax Act, 2025 coming into effect from 1 April, 2025, taxation of gifts will be governed under the new act.

In India, a rules governing tax on gifts in India is covered under various subsections under Section 92 of the Income Tax Act, 2025. If a gift is deemed to be taxable, the value of the gift is added to the income of the individual receiving the gift under the head “Income from Other Sources” for the applicable tax year. So, the tax rate on gifts in India depends on the income tax slab rate for the tax year in which the gift was received.

A few different factors have to be considered, to determine if a gift is taxable or exempt. These are mentioned in the Income Tax Act, 2025 u/s 92 (m) as well as its various subsections and include the following:

• The type of gift (cash, jewellery, immovable property, etc.),
• The value/fair market value/stamp duty value of the gift
• The relationship between the person/person providing the gift and the recipient
• Occassion on which the gift is made

Let’s take a closer look at how each of these factors impact taxability of gifts in India

Under current tax regulations, not all gifts are subject to tax. If all gifts received in a tax year are cumulatively valued at less than ₹50,000, all the gifts will be tax exempt.

While gifts exceeding ₹50,000 in value are generally taxable in the hands of the receiver, several important exceptions are applicable, depending on the occasion and/or source of the various gifts.

Below is an overview of gifts that are exempt from tax in India:

Knowing the various situations when the gift taxation law applies can help you determine if the gift is exempt or subject to tax. Here are some practical examples to help you understand better:

Understanding the key tax implications of gift transactions for NRIs (Non-Resident Indians) is essential to ensure compliance with India's income tax regulations. Here is an overview of the gift tax rules for NRIs based on the applicable provisions:

• Any gift given by an NRI to a resident Indian is subject to the taxation rules in India.
• Any gift received by an NRI from a resident Indian is subject to taxation as per Indian income tax provisions. As per FEMA regulations and LRS limits of up to US$2.5 lakh in a tax year.
• Gifts from NRIs to non-relatives in India are taxable if the value exceeds ₹50,000 in a tax year. Then, the recipient is liable to pay tax on the entire amount.
• Gifts from one NRI to another NRI are taxable if the gift is received in India, subject to applicable limits. But no tax applies in India the gift is exchanged outside India.
• Gifts from NRIs to their relatives residing in India are fully exempt from tax.
• Gifts to NRIs must be routed through proper banking channels to comply with foreign exchange regulations.
• Gifts other than shares are permissible up to prescribed limits without prior RBI approval.
• The source of funds received as gift must be clearly identifiable to avoid regulatory issues.
• Proper documentation is mandatory in the case of all gift transfers, and execution of a gift deed is recommended for substantially expensive gifts.

In addition, there are certain gifts that remain exempt in NRI transactions. These include gifts received from a relative, under a will or by way of inheritance, on the occasion of an individual’s marriage, from a local authority, in contemplation of the payer’s death, or from a recognised fund, university, educational institution, hospital, medical institution, or trust.

Even if the gift is exempt, it's important to keep proper documentation. Having a few essential documents can help you demonstrate that the amount is legitimate and qualifies for the gift tax exemption in India. These include:

• Identity proof and PAN of the donor (if available)
• Proof of relationship (if necessary), such as a birth certificate or family details
• Valuation report for jewellery or movable assets (if substantial)
• Gift deed (recommended for high-value gifts or property transfers)
• Bank statement or transaction proof showing the transfer of funds
• Property documents like the sale deed or stamp duty papers for gifts of immovable property

As per Section 186 of the Income Tax Act, 2025, there are some key limits on cash transactions including gifts received. Any person or entity cannot accept cash payments of more than ₹2 lakh from a single transaction, event, or person within a day.

In case of violation, a penalty amount equal to the amount received in cash can be levied by tax authorities. So, when gifting money, especially in the case of large amounts, one should consider using online bank transfers or cheques to keep legal hassles and penalties at bay.

In a nutshell, it is important to understand the tax on gifts in India and how it works in order to take advantage of the exemptions and maintain legal compliance. Gifts received from certain specified individuals in India are non-taxable, irrespective of the amount received.

Additionally, gifts received from non-relatives will become taxable if they exceed ₹50,000 within a single financial year. Knowing who qualifies as a “relative,” maintaining proper documentation, and reporting gifts correctly in yourIncome Tax Return (ITR) can help you avoid unnecessary tax liability and future complications.