Is a gift from a relative taxable in India?

No, gifts from relatives, including NRIs, are exempt from tax under Section 56(2)(x) of the Income Tax Act.

What is the limit for tax-free gifts in India?

Gifts from non-relatives are taxable if their value exceeds ₹50,000 in a financial year.

Are gifts from NRIs taxable in India?

Gifts from relatives who are NRIs are not taxable, but gifts from non-relatives is taxed.

What is considered a relative under the Income Tax Act for gift exemptions?

Relatives include parents, siblings, spouse, and other specified family members.

Are all gifts taxable if received from abroad?

No, gifts from relatives abroad are exempt, but gifts from non-relatives abroad may be taxable if above ₹50,000.

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What Are ITAT Rules On Taxation On Gifts Above 20 Lakhs From Abroad?

Neha Gupta

Author

Updated: 28-01-2025 at 6:45 AM

What Are ITAT Rules On Taxation On Gifts Above 20 Lakhs From Abroad?

Taxation is one of the integral components that helps in the survival of a country’s economy as it is a primary source of revenue for the government so that they can work effectively and use those funds for the betterment of the country. In India, the Income Tax Act of 1961 serves as a head body that comprises a list of incomes subjected to be taxed and also subsidies and reliefs so that the taxpayers don’t feel pressured and one of those reliefs is provided upon gifts.

In an important hearing, the Income Tax Appellate Tribunal (ITAT) announced that gifts worth Rs. 20 lakhs received from a relative are not subject to income tax. This decision portrays how tax laws have considered emotional values associated with gifts received or given by family members out of nothing but love, affection, and care.

Background Of The Case

A man from India received a substantial gift worth Rs. 20 lakhs from his brother who is a Non-Resident Indian (NRI). As it was a gift, the man didn’t include the gift amount in his accounts. Later upon checking, the Income Tax Department issued the order to tax the gift because of its value, which should be treated as that man’s income.

Many such cases have been seen in the past as well due to the complexities and ambiguities related to taxing gifts, especially those received from abroad.

ITAT’s Ruling Of The Case

After hearing both sides and in light of the available facts and relevant provisions, the ITAT announced its decision in favour of the taxpayer as the amount that was deemed questionable was a gift given by a relative, specifically the man’s brother. Hence, the man is not liable to pay tax on it according to the provisions laid out in the Income Tax Act. It was also clear that any type of gift given by a relative is exempted from taxation even if the relative is a NRI.

The ruling was given based on Section 56(2)(x) of the Income Tax Act which is concerned with gifts and their taxation. The section also defines the term ‘relatives’ which includes siblings of the taxpayers irrespective of their residency, whether across India or outside the shores of India.

Implication Of The Judgement

Gift-giving and receiving is a warm and simple gesture used to symbolise one’s emotions to their loved ones. The ITAT’s ruling in favour of the man served as an example and made the citizens of India protected and not exploited. The Indian culture is very rich wherein gifts carry a wave of emotions bigger than the wave of price.

This ruling also prevents the occurrences of such cases in the future and spreads awareness in the minds of the taxpayers that the law is made to protect and respect their rights.

Conclusion

This case and the ruling given by the ITAT portray the intricacies of the constitution of India and how it was made to safeguard individuals and provide aid to them rather than creating a nuance in their lives. The judgement is a positive development for the taxpayers and also poses as a reminder that laws related to tax were made by considering the emotional value of the citizens as well.

If you’ve any queries, you can contact the ITAT through their official website or by dialling 022-22033848.

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