Gifts from relatives are Tax-Exempt

Any gift received from relatives of any amount during financial year is completely exempt from tax. Hence, it's crucial to understand the meaning of the expression 'relative' for this purpose. Explanation to Sec. 56(2) (vi) provides that the expression "relative" means:

• 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 an individual;
• Any lineal ascendant/descendant of spouse of the individual

Gift of more than Rs. 50,000/- can be received from below mentioned relatives without any taxes

Tax-Smart 1: Exemption for Marriage Gifts

Any gift received from any person on occasion of marriage of the gift's recipient will not be liable to income tax at all. Also there is no monetary limit attached to this exemption, which is provided by Section 56(2) (vi).

Tax-Smart-2: Tax-Exempt Gifts from Other Persons

Besides gifts received from relatives or on occasion of marriage, following are the other gifts which are completely tax-exempt as provided in Section 56(2)(vi) of the I.T. Act:

1. Gift received from a Will or by way of inheritance;
2. Gift received in contemplation of death of the donor;
3. Gift from a local authority;
4. Gift received from any fund, foundation, university or other educational institution or hospital or any trust or any institution referred to in Section 10(23C); and
5. Gift received from any trust/institution, which is registered as public charitable trust or institution u/s 12AA.

Tax-Smart 3: Gifts in Kind are Tax-Exempt

Provisions relating to the taxation of gifts from non-relatives & non-specified persons in excess of Rs. 50,000 will be liable to income tax only when the gift is sum of money, by way of cash, cheque or a bank draft. Gifts in kind like a gift of shares, gift of land, gift of house, gift of units or even mutual funds, jewellery, etc. shall not be liable to any income tax at all.