The taxation of gifts in India is governed by the Income Tax Act, 1961, and it applies to both residents and Non-Resident Indians (NRIs). The tax treatment for gifts depends on the nature of the gift, the relationship between the giver and receiver, and whether the gift is given in cash or kind.

Key Provisions Regarding Gifts under the Income Tax Act

1. Taxability of Gifts in India

Under Section 56(2)(x) of the Income Tax Act, any gift received by an individual is subject to tax under the following conditions:

• Gifts exceeding ₹50,000 in a year from a non-relative (whether in cash or kind) are taxable.
• The amount of the gift exceeding ₹50,000 is treated as income and is taxed under the head “Income from Other Sources”.
• If the gift is given by a relative, it is exempt from tax, regardless of the amount.

2. Gifts Received from Relatives

As per the Income Tax Act, gifts received from the following relatives are exempt from tax under Section 56(2)(x):

• Parents (whether biological, adoptive, or step-parents).
• Siblings (brothers and sisters).
• Spouse.
• Children (biological or adopted).
• Grandparents.
• Uncles and Aunts.

Hence, gifts received from close family members or relatives are not taxable, irrespective of the amount or nature of the gift.

3. Gifts Received from Non-Relatives

If a gift is received from a non-relative, it is subject to tax if the value of the gift exceeds ₹50,000 in a financial year. The gift is added to the recipient’s income and taxed according to the applicable income tax slab rates.

• Cash Gifts: Any cash gift above ₹50,000 from a non-relative in a year is taxable.
• Non-Cash Gifts (Property, Jewelry, Shares, etc.): If the market value of the property or asset received as a gift exceeds ₹50,000, the recipient must include the market value of the asset in their income.

4. Exemptions for Gifts from Specific Sources

Certain gifts are exempt from tax, even if received from non-relatives:

• Gift on the occasion of marriage: Gifts received on the occasion of marriage are completely exempt from tax, regardless of the value and the relationship between the giver and the receiver.
• Gifts from a Will or Inheritance: Gifts received by way of inheritance or as a bequest from a deceased relative are exempt from tax.
• Gift from Charitable Institutions: Gifts received from recognized charitable or religious institutions are also exempt.

5. Tax Treatment of Gifts Given by NRIs

While the taxation of gifts is relevant to the recipient, NRIs who give gifts to family members in India should be aware of the following:

• Taxation in India: If an NRI gives a gift to a relative in India, it is not taxable in India for the recipient, subject to the relationship and nature of the gift. However, any gift to a non-relative exceeding ₹50,000 would be taxable for the recipient.
• Repatriation of Gifts: NRIs are allowed to send gifts to family members in India, but they must comply with the foreign exchange regulations under FEMA (Foreign Exchange Management Act). Gifts in the form of money or assets can be repatriated to India, subject to the RBI (Reserve Bank of India) guidelines, and the recipient must report the same under Form A2 (for money gifts).

6. Valuation of Non-Cash Gifts

Non-cash gifts, such as property, jewelry, shares, or other valuables, are taxed based on the market value or the fair market value at the time of receipt. If the gift is in the form of immovable property, the stamp duty value will be considered the market value for tax purposes.

• Jewelry: Market value as per the latest valuation by a jeweler.
• Shares and Securities: The value is determined based on the market price at the time of the gift.
• Immovable Property: The stamp duty value is taken as the fair market value.

7. Gifts Received from Foreign Countries

• If the gift is received from a foreign relative or individual, it is treated similarly to domestic gifts:
  • Gifts from relatives: Exempt from tax.
  • Gifts from non-relatives: Taxable if the value exceeds ₹50,000.

However, foreign gifts received by NRIs must comply with FEMA regulations, especially for gifts sent from abroad to India. Gifts exceeding ₹5 lakh in a financial year must be reported to the Reserve Bank of India (RBI).

Example Scenarios

1. Gift from Parent

• If an NRI receives ₹1,00,000 from their parent in India, this is exempt from tax, as gifts from parents are exempt under the Income Tax Act.

2. Gift from a Non-Relative

• If an NRI receives ₹60,000 from a friend in India, the gift amount above ₹50,000 (i.e., ₹10,000) will be taxable as income under “Income from Other Sources.”

3. Gift on Marriage

• If an NRI receives a gift of ₹1,00,000 in cash or in kind on the occasion of their marriage, this is exempt from tax under the Income Tax Act, irrespective of the relationship with the giver.

4. Gift of Property

• If an NRI gives an immovable property worth ₹80,000 to their sibling in India, the gift will be exempt from tax for the recipient, as gifts between siblings are exempt from tax.

5. Gift from Foreign Relative

• If an NRI receives a gift of ₹10,00,000 from a foreign relative, it will be exempt from tax, as gifts from relatives abroad are treated the same as those from Indian relatives.

Conclusion

• Gifts from Relatives: Exempt from tax, no limit on the amount.
• Gifts from Non-Relatives: Taxable if the value exceeds ₹50,000 in a year, taxed under “Income from Other Sources.”
• Marriage Gifts: Exempt from tax, irrespective of the amount.
• Non-Cash Gifts (Property, Shares, etc.): Taxed based on market value or fair market value at the time of receipt.
• Repatriation of Gifts: Gifts from abroad can be sent, but must comply with FEMA guidelines.

If you have any specific queries regarding the taxability of gifts in your case or need help with planning tax-efficient gifts, feel free to ask!