Gift from Relatives – Income Tax Exemption Explained [Section 56(2)(x)]
Are you wondering whether gifts received from your family members are taxable? The good news is – gifts received from relatives are exempt from tax under the Indian Income Tax Act. But who exactly qualifies as a “relative” under the law?
In this comprehensive guide, we break down the tax exemption on gifts from relatives, define who is considered a relative under Section 56(2)(x), and provide practical examples, rules, and SEO-optimized content you can use on your blog or knowledge base.
💼 Taxability of Gifts under Income Tax Act
Under Section 56(2)(x) of the Income Tax Act, any sum of money or property received by an individual or HUF without consideration (i.e., as a gift) is taxable as “Income from Other Sources”, if:
- The aggregate value of gifts received during a financial year exceeds ₹50,000, and
- The gift is not received from a “relative” or other exempt sources.
✅ Exception: If the gift is received from a “relative”, it is fully exempt – even if the value exceeds ₹50,000.
👪 Meaning of “Relative” under Section 56(2)(x)
The term “relative” has a specific and restricted definition in the Income Tax Act. It does not cover all family members.
✅ The following persons are considered “relatives”:
For an Individual:
- Spouse of the individual
- Brother or sister of the individual
- Brother or sister of the spouse of the individual
- Brother or sister of either of the parents of the individual
- Any lineal ascendant or descendant of the individual
- Any lineal ascendant or descendant of the spouse of the individual
- Spouse of the persons referred to in (2) to (6)
For a Hindu Undivided Family (HUF): Any member of the HUF is considered a relative.
🧾 Examples – Taxable vs. Exempt Gifts
| Recipient / Donor | Relative? | Taxability | Remarks |
|---|---|---|---|
| Gift from Father | ✅ Yes | ❌ Not Taxable | Lineal ascendant |
| Gift from Grandmother | ✅ Yes | ❌ Not Taxable | Lineal ascendant |
| Gift from Brother-in-law | ✅ Yes | ❌ Not Taxable | Brother of spouse |
| Gift from Uncle (Father’s Brother) | ✅ Yes | ❌ Not Taxable | Brother of parent (covered) |
| Gift from Sister of Father (Fua) | ✅ Yes | ❌ Not Taxable | Sister of parent (covered) |
| Gift from Cousin | ❌ No | ✅ Taxable if > ₹50,000 | Not a covered relative |
| Gift to Brother’s Daughter | ❌ No | ✅ Taxable if > ₹50,000 | Not covered |
| Gift from Wife | ✅ Yes | ❌ Not Taxable | Spouse is a relative |
| Gift from Friend | ❌ No | ✅ Taxable if > ₹50,000 | Not a relative |
| Gift to Grandson / Granddaughter | ✅ Yes | ❌ Not Taxable | Lineal descendant |
| Gift from Nephew / Niece | ❌ No | ✅ Taxable if > ₹50,000 | Not covered |
📚 What are Lineal Ascendants and Descendants?
Lineal Ascendants – Direct ancestors: Father, Mother, Grandparents, Great-grandparents, etc.
Lineal Descendants – Direct offspring: Son, Daughter, Grandchildren, Great-grandchildren, etc.
Note: Cousins, nephews, nieces, and their spouses are not covered under the definition of “relative”.
📜 Gifts That Are Always Exempt (Even if Not from Relatives)
Gifts are also exempt from tax in the following cases:
- On the occasion of marriage of the individual
- Received under a will or inheritance
- Received from a local authority
- From a trust or institution registered under Section 12A / 12AB
- From certain government-approved funds or institutions
✅ Tips for Tax-Free Gifting Within Family
- Use bank transfer or cheque to maintain proof
- Document large gifts using a gift deed
- Gifts to minor children are clubbed with parent’s income
- No upper limit for gifts from defined relatives
❓ FAQs – Gift from Relatives & Income Tax
Q1. Is a gift from a cousin taxable?
Yes, a cousin is not a “relative” under the Income Tax Act. If the gift value exceeds ₹50,000 in a year, it is taxable.
Q2. Can I give ₹10 lakhs to my father? Will he pay tax?
No. Since your father is a relative, the gift is fully exempt from tax, irrespective of the amount.
Q3. Is a gift to my brother’s daughter exempt?
No. Brother’s daughter is not a relative as per the Income Tax Act. Gifts above ₹50,000 will be taxable in her hands.
📝 Conclusion
Gifting within family is common in Indian culture, and the Income Tax Act provides generous exemptions for gifts received from specified “relatives”.
Understanding the exact definition of a relative under Section 56(2)(x) is critical to avoid unintended tax liabilities.
Plan your gifting with proper documentation, and you’ll stay both generous and tax-efficient!
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