Gift Tax Laws

The Gift Tax Act, constituted in 1958, regulates the taxability of all gifts received by individuals in India. When the Act was constituted, a gift received from anyone other than blood relatives, having a value more than Rs.25,000, was taxable. However, on October 1, 1998, the gift tax was demolished entirely. Later, in 2004, a new provision regarding gift tax was introduced under the Income Tax Act, 1961. Under section 56 (2) of the Act, gifts received by an individual in excess of Rs.50, 000 during one assessment year would be taxable.

Gifts Tax Exemptions: Common Clauses

A gift, regardless of its value, is exempt from tax if it is received from a relative. The Income Tax Act considers the following parties as relatives:

• Spouse
• Brother or sister
• Siblings of the spouse
• Siblings of parents and in-laws
• Lineal ascendants or descendants of self or spouse

Additionally, gifts received in the following cases are tax-exempt, regardless of their value:

• On the occasion of marriage
• By way of inheritance or under a will
• By a trust, local authority, university and other such bodies

Gift Tax in India: Special Tax-Exemption Provisions

Gift tax is not only levied on the receiver, but the giver as well. However, in the following cases, the giver may waive off the entire gift tax liability:

• Gift of an immovable property situated outside India.
• Gift of a movable property outside India, provided the giver is a citizen and an ordinarily resident of India.
• Gift by an NRI in foreign currency to a resident relative.
• Gift in the form of Special Bearer Bonds.
• Gift as Central Government Savings Certificates.
• Gift to children for education, up to a reasonable limit.
• Gift of bonus or retirement benefit by an employer.