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Gift Tax in India

Last Update Date : July 23, 2019
Estimated Read Time: 7 min

It is wonderful to receive gifts from your family and friends, especially during festivals and celebrations. However, as per the Gift Tax Act, 1958, the gifts you receive may be chargeable to income tax under the head “Income from Other Sources”.

Read this guide by H&R Block to know what gift tax is, be fully aware of the gift tax rules and ensure that you do not have any unplanned tax outflow.

What is a Gift?

Any asset you receive from someone without giving anything in return to them (without consideration) is considered as a “gift” by under income tax laws. The following are the categories of gifts under the I-T Act, 1961:

  • Money received in the form of cheque or cash
  • Immovable property such as a house, land, building, etc.
  • Movable property such as jewellery, paintings, shares, securities, etc.

Understanding Gift Tax Act Rules and Regulations

What is Gift Tax in India?

The income tax levied on the gifts that you receive in money or its worth and which is over and above a certain limit by the income tax department is commonly referred to as gift tax in India.

Present Rate of Gift Tax

The gifts you receive will be taxed at the normal income tax slab rate applicable to you. The following table contains the details of the type of gifts, the minimum value of gifts at which tax is applicable, and the amount which will be chargeable to tax:

Type of GiftCondition for TaxabilityAmount Taxable
Money without considerationSum > Rs 50,000Total amount of gift received
Immovable property without considerationStamp duty value > Rs 50,000Stamp duty value of the property
Immovable property with inadequate considerationStamp duty value exceeds consideration amount by > Rs 50,000Stamp duty value less consideration
Movable property without considerationFair market value > Rs 50,000Fair market value of the property
Movable property with inadequate considerationFair market value exceeds consideration amount by > Rs 50,000Fair market value less consideration

Stamp Duty Value for Immovable Property

To determine the taxability of a gift which is an immovable property, the stamp duty value is considered. It is possible that the selling price of the property is higher/lower than the stamp value. In such a case, the rules under section 50C are applicable to determine the stamp duty value.

Gift Tax Exemption

Generally, if the value of the gift exceeds Rs 50,000, you must pay tax on it. However, this rule is not applicable for some gifts, which are completely tax-free, irrespective of their value. Therefore, you do not have to pay any tax when you receive gifts in the following situations:

  • You receive a gift from any of your relatives.
  • You receive a gift on the occasion of your marriage by your relatives as well as others.
  • You are in receipt of money or property by way of will or inheritance.
  • You receive a gift in contemplation of death by the donor of the gift.
  • You receive a gift from a local authority, foundation, university, fund, hospital or trust.

Gift chart as per income tax rules

Here is nice chart in the form of an infographic which will help you easily understand taxability of gifts, exemptions and other rules. Please click on the below image to see the full infographic.

List of Relatives Exempt from Gift Tax

As per the Income Tax Act, a “relative” can be any of the below-mentioned people:

  • Your spouse
  • Your brother/ sister
  • Brother/ sister of your spouse
  • Brother/ sister of any of your parents
  • Any of your lineal ascendant/ descendant
  • Any lineal ascendant/ descendant of your spouse
  • Spouse of the person referred to in 2) to 6)

What is Gift Deed?

To ensure that the exemptions on gifts are not misused by the taxpayers to escape tax, the ITD scrutinises gifts, especially when their value is high. Therefore, it is important that you maintain systematic documentation of the gifts in the form of a “gift deed”.

A gift deed is a legal document which describes the transfer of the gift. It should contain the following information:

  • Date and place where the gift deed is made
  • Details of the giver/donor (name, father’s name, date of birth, address)
  • Details of the receiver/donee (name, father’s name, date of birth, address)
  • Relationship of donor and donee
  • Details of the property that is being gifted
  • Signatures of donor and donee
  • Details of two witnesses in whose presence the deed was executed
  • Signatures of the witnesses

SIDENOTE: Apart from the gift deed, it is also important for the donor to have proof of the source of funds to buy the gift.

Stamp Duty on Gift Deed

Registration of the gift deed is required for transfer of immovable property. Therefore, you must pay a stamp duty fee when you make the gift deed. The stamp duty on gift deed varies from state to state, and depends on the relationship between the donor and the donee.

Gift Tax Planning Tips

How Much Can a Spouse Gift Tax-Free?

If you gift money to your wife, it will be tax-exempt only in her hands. You must still pay tax on the complete amount you gift your wife, as it comes under “taxable income” for you.

You can indirectly save tax by giving a gift to your wife if she invests the money in a high return yielding investment, such as ELSS. If she does not have any income, the return on this investment will not be taxed, as she falls under the exemption limit.

In case your non-earning wife earns an income from the gift you give her, the income will be clubbed with your income for tax purposes. However, if she is an earning individual, she will be liable to pay tax on this income.

Our in-house tax experts can help you with your tax planning to ensure that you receive maximum tax benefits!

[ Read More: Taxability of Gifts ]

Save Tax by Gifting to Family Members

If you have any close family member (covered relative) who falls in nil or lower tax bracket, then you can save significant taxes by gifting/ transferring your return yielding investment in their name.

But, do consider other factors such as succession issues before you transfer anything to your relative just for tax-saving.

Save Tax by Gifting Money to Parents

If your parents are retired, they can invest the money you gift them in a high return investment scheme and save the overall tax liability of your household.

Taxability of Gifts in Different Situations

Let’s look at different situations where giving gifts attracts income tax.

  • Tax on Gifts Given to the Employees by an Employer: Any gift you receive from your employer will be considered as a “perquisite” under the head “Income from Salary”. It will only be taxable if the total value of the gifts your employer gives you exceeds Rs 5,000.
  • Gifting to Daughter In-Law: If you gift anything to your daughter-in-law without adequate consideration, then any income derived by her out of the gifted amount/ property will be clubbed in your hands.
  • Taxability of Gifts From Parent to Child: As any income (other than the manual work done by him; or through any activity involving application of his skill, talent or specialised knowledge and experience derived by minor child) gets clubbed in the hands of the parent having higher taxable income. Therefore, gifting the amount to minor children may not help the tax situation.

People Also Ask

Q. What is the Gift Tax Act, 1958?

A. The Gift Tax Act was an Act introduced by the Government of India to levy gift tax on recipient of gifts. However, it was abolished in the year 1998. Later in the year 2004, it was partially renewed by introducing section 56(2) in the Income Tax Act, 1961 to levy income tax on the recipient of gifts.

Q. Is gift tax a direct or indirect tax?

A. Gift tax is a term commonly used to describe income tax, which is a direct tax levied on gifts.

Q. If my friend gifts me Rs 90,000, will the complete amount be taxable or only the amount exceeding Rs 50,000?

A. As your friend is not considered a “relative”, the whole amount of Rs 90,000 will be chargeable to tax.

Q. Is giving gift to grandchildren tax-free in India?

A. Gifts are taxable in the hands of the receiver in India if the value of the gifts exceeds Rs 50,000. However, gifts from relatives are tax-free. Therefore, gifts from grandparents to grandchildren are tax-exempt for the latter.

When you receive a sum of money as a gift, you must consider investing it to build your financial health. Your investment decision is based on several factors. However, if you intend to save tax, you can consider investing in tax-saving schemes under section 80C.

How Can H&R Block Help You?

Saving taxes and accurately filing income tax return becomes very easy with careful tax planning along with professional help. You can either use our intuitive income tax e-filing platform to easily e-file your tax return or let our tax experts file it for you. We have a team of in-house tax experts who can accurately file your tax returns online while giving you maximum tax benefits.

    • HIRE AN EXPERT TO E-FILE YOUR TAX RETURN

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CA Madhuri Marne
Madhuri is a tax expert at H&R Block (India) with over a decade of professional experience. Having co-authored a book on economics for the ICAI exam, she now enjoys writing about tax-related topics in a simple and easy manner. Outside of work, Madhuri is passionate about teaching students who are appearing for professional exams.

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