A gift is taxable in India only when three things line up. The giver is not a "relative" as the law defines it. The occasion is not an exempt one, such as your own marriage, a will or inheritance. And the value crosses ₹50,000. If any one of these fails, the gift is tax-free. For gifts received on or after 1 April 2026, the rule sits in section 92(2)(m) of the Income-tax Act, 2025. Gifts received up to 31 March 2026 remain governed by section 56(2)(x) of the Income-tax Act, 1961, which works on the same ₹50,000 structure.
There is no separate gift tax. When a gift is caught, its value is treated as your income under the head "Income from other sources" for that tax year, and it is the person who receives the gift who pays, not the person who gives it.
Question 1: Is the giver a relative under section 92(5)?
Start here, because a gift from a relative is fully exempt under section 92(3)(a), whatever the amount. A ₹25 lakh transfer from your father or a flat gifted by your grandmother creates no income in your hands.
The catch is that "relative" is a closed list, not the everyday meaning of family. For an individual, section 92(5) counts only these people:
- Your spouse.
- Your brother or sister.
- Your spouse's brother or sister.
- A brother or sister of either of your parents (your uncles and aunts by blood).
- Any lineal ascendant or descendant, maternal as well as paternal (parents, grandparents, children, grandchildren).
- Any lineal ascendant or descendant of your spouse (parents-in-law, and so on).
- The spouse of any person in the second to sixth items above, so a sister's husband, a brother's wife, a son-in-law, a daughter-in-law and an aunt by marriage all qualify.
For a Hindu undivided family, any member of the HUF is a relative. If you manage an HUF, the rules on clubbing and partition of HUF income decide what happens to income from assets a member puts into the family pool.
People who fall outside the list
Friends, cousins, nephews and nieces, a brother's or sister's in-laws, and business associates are not relatives. The Income Tax Department's FAQs on gifts received by an individual or HUF say plainly that a gift from a friend is taxable once the other conditions are met.
The list is also one-directional, which catches many families. Your paternal uncle is a relative of yours, because he is your father's brother. You are not a relative of his, because a nephew is neither his sibling nor his lineal descendant. So ₹1,00,000 from the uncle to the nephew is exempt, while the same ₹1,00,000 from the nephew to the uncle can be taxed in the uncle's hands if his other non-relative gifts take him past ₹50,000 in the year.
Question 2: Does the occasion or route make it exempt?
Where the giver is not a relative, move to section 92(3). The gift is still outside the charge when it is received:
- On the occasion of the individual's own marriage.
- Under a will or by way of inheritance.
- In contemplation of the death of the giver.
- From a local authority.
- From or by a registered non-profit organisation.
- Through a transaction that section 70(1) says is not a transfer.
- By a trust, from an individual, where the trust is created solely for the benefit of that individual's relative.
- From a class of persons notified by rules, subject to their conditions.
Marriage is the only celebration on this list, and it has to be the recipient's own marriage. The department's FAQs confirm that gifts on birthdays, anniversaries or festivals get no exemption. Gifts friends give your son or daughter at their wedding are exempt in the child's hands. Gifts made to you as the parent on that day do not get the marriage exemption, though gifts from your own relatives stay exempt anyway.
Question 3: What kind of asset is it, and does it cross ₹50,000?
Only three kinds of receipt are caught, and each has its own test.
Money
Add up every taxable sum of money received without consideration during the tax year. Once the total exceeds ₹50,000, the whole total is income, not just the excess. The FAQs make the same point: the test is applied to the year's total, not to each gift separately.
Immovable property
Land or a building received free is taxed when its stamp duty value (the value the state stamp authority adopts for registration) exceeds ₹50,000. Here the limit applies property by property; two gifted plots are not added together.
A purchase can also be caught. If you buy immovable property for less than its stamp duty value, the shortfall is taxed in your hands when it is more than the higher of ₹50,000 and 10% of the price you paid. When the agreement date and registration date differ, the stamp duty value on the agreement date can be used. That relief needs the price, in whole or in part, to have been paid on or before the agreement date through a specified banking or online mode as defined in section 66(32), not in cash. The seller faces a separate test on the same deal, explained in the stamp duty value rules for the seller under sections 53 and 78.
Other "property"
Section 92(5) limits "property" to capital assets of the recipient that fall into these types: shares and securities, jewellery, archaeological collections, drawings, paintings, sculptures or any work of art, bullion and virtual digital assets. If their aggregate fair market value received free in the year exceeds ₹50,000, the whole value is income. If you buy them for less than fair market value and the gap exceeds ₹50,000, the gap is income.
Anything outside this list is not caught by section 92(2)(m). A car, a phone or furniture gifted by a friend creates no income under this provision, however expensive, because none of them is on the list. The list also covers only capital assets, so jewellery a jeweller receives as trading stock is dealt with under business income rules instead.
Two worked examples for tax year 2026-27
Example 1: several small gifts. Say Riya, a salaried employee, receives these between April 2026 and March 2027:
- ₹30,000 by UPI from a college friend on her birthday in June 2026.
- ₹25,000 by bank transfer from a former colleague in October 2026.
- ₹5,00,000 from her mother's brother in December 2026.
- A gold chain with a fair market value of ₹40,000 from her cousin in February 2027.
The ₹5,00,000 is exempt, because a mother's brother is a relative. The two sums from the friend and the colleague total ₹55,000. That exceeds ₹50,000, so all ₹55,000 is taxable, not ₹5,000. The chain is jewellery from a non-relative, but it is the only "property" she received free during the year and ₹40,000 does not exceed ₹50,000, so it is not taxed. Riya adds ₹55,000 to her income from other sources.
Example 2: buying below stamp duty value. Say Arjun agrees to buy a flat from an unrelated seller for ₹60,00,000 and the stamp duty value is ₹65,00,000. The shortfall is ₹5,00,000. The tolerance is the higher of ₹50,000 and 10% of ₹60,00,000, which is ₹6,00,000. The shortfall is within it, so nothing is taxed. Now suppose the stamp duty value is ₹70,00,000. Then the shortfall of ₹10,00,000 exceeds ₹6,00,000, and the entire ₹10,00,000 is taxed in Arjun's hands. If Arjun thinks the stamp duty value is too high, the valuation can be referred to a Valuation Officer, as it can for the seller.
After an exempt gift: clubbing, cost and cash limits
A gift that is exempt when received can still have tax effects later. Three are worth checking before money or assets move within a family.
Income from the gift may be taxed in the giver's hands
Section 99 of the Income-tax Act, 2025 clubs income from assets given away without adequate consideration. If the asset went to the giver's spouse (other than under an agreement to live apart) or to the giver's son's wife, the income it earns is added to the giver's income. So when a husband gifts ₹10,00,000 to his wife and she puts it in a fixed deposit, the gift itself is exempt, but the interest on that deposit is taxed as the husband's income. Section 99 also generally includes a minor child's income in a parent's income, subject to its exclusions for the child's own work, skill or disability-related income.
Your cost when you sell a gifted asset
When you sell a gifted or inherited asset, section 73 of the Income-tax Act, 2025 uses the previous owner's cost as your cost. Improvement costs borne by that owner or by you are added. Keep the giver's purchase deed, contract notes or jewellery bills with the gift deed, because they fix your capital gain years later. Where a gift or low-price purchase was taxed under section 92(2)(m), section 73 uses the value that was taxed as your cost, so you are not taxed on the same amount twice.
Cash gifts of ₹2 lakh or more
The relative exemption answers only the income question. Separately, section 186 of the Income-tax Act, 2025 bars anyone from receiving ₹2,00,000 or more in cash from one person in a day, for a single transaction, or for transactions relating to one event or occasion. Its exceptions cover receipts by the Government, banks and a few notified cases; they do not cover family gifts or weddings. A father handing his daughter ₹3,00,000 in cash for her wedding creates no income for her, but it does breach the cash limit.
Under the 1961 Act, the matching penalty was a sum equal to the amount received, as the department's guidance on cash transaction limits explains. The ₹2 lakh cash receipt limit under section 186 carries this restriction forward from 1 April 2026 with a corresponding penalty, so large family gifts should move by bank transfer or cheque.
Paperwork that settles questions later
Even an exempt gift can draw questions, because a large credit in a bank account looks like unexplained money until its source is shown. For any sizeable gift, keep the following together:
- A short gift deed or letter naming the giver, the recipient, the relationship, the amount or asset and the date, and stating that nothing is given in return (for immovable property, a registered gift deed under state stamp law).
- The bank trail showing the money leaving the giver's account and reaching yours.
- Evidence of the giver's capacity to give, such as their bank statement or return, if the amount is large relative to their visible income.
- For marriage gifts, a list of gifts received with the wedding date, since the exemption depends on the occasion.
For gifts received before 1 April 2026, apply the same three questions under section 56(2)(x) of the 1961 Act; the department's note on deemed income and gifts sets out that earlier version. For gifts received from 1 April 2026, read section 92 as it stands on the date of receipt, since the list of exceptions in section 92(3)(i) can be widened by rules.
