Income Tax Return: Should Gifts Be Declared In ITR Filing? Know Taxation Rules
Gifts received in a financial year should be accurately reported in the ITR filing if they exceed the defined limit in value.
Exchanging gifts has traditionally been an integral part of Indian society. Be it cash, jewellery, property, or other valuable items, gifts are essential for all festive occasions and life events like marriage. Though it’s a delight to receive gifts, many of them may increase your tax burden.
While filing the income tax return (ITR), it’s important to remember that gifts — often a sign of goodwill and celebration — should also be a part of your financial disclosures. Certain gifts, based on their value, may attract income tax as per the existing laws.
The Income Tax Act, 1961, has clear provisions about how gifts are taxed and when they should be reported. So, it’s important to report gift items accurately in your ITR filing to avoid a notice from the Income Tax Department later.
Gift Taxation in India
Gift taxation in India was introduced through the Gift Tax Act (GTA) in 1958, covering gifts in cash or kind. The Act was abolished in 1998, making gifts tax-free, but it was reintroduced in 2004 under the Income Tax Act.
Currently, as per Section 56 of the Income-tax Act, 1961, gifts received beyond a certain limit in value are taxed as “Income from Other Sources” in the hands of the recipient.
In India, gifts received from relatives — as defined under the Income Tax Act — are completely tax-exempt, regardless of the amount. There is no upper limit on the value of gifts you can receive from family members without attracting any tax liability.
However, if a gift is received from someone who is not a relative and its total value exceeds Rs 50,000 in a financial year, the entire amount becomes taxable in the hands of the recipient under the head ‘Income from Other Sources.’
According to the I-T Act, relatives include your spouse, brother or sister, spouse’s brother or sister, parents or your spouse’s parents, any lineal ascendant or descendant, such as grandparents or children, and the spouses of all these relatives.
Tax Exemptions For Gifts: What You Should Know
Under Section 56(2)(x) of the Income Tax Act, certain gifts are exempt from tax. Here are scenarios where gifts are not taxable:
On marriage: Gifts received during weddings, regardless of value, are tax-free.
From relatives: Gifts from close relatives defined by law are exempt.
Through will or inheritance: Money or property inherited through a will or estate is not taxable.
From registered trusts: Gifts from charitable or religious trusts registered with the government are exempt.
From medical institutions: Donations or support from recognised hospitals or medical bodies are tax-free.
From educational institutions: Scholarships, grants and financial aid from universities or schools are exempt.
From local authorities: Gifts from municipal bodies or local government entities are not taxable.
From personal trusts: Gifts received from trusts created solely for an individual’s benefit are exempt.
Non-transfer transactions: Transactions not considered a transfer of ownership are not taxable.
Personal items: Gifts of personal belongings like cars, phones, TVs, furniture, and watches are tax-free, even if their value exceeds Rs 50,000.
Should Gifts Be Declared In ITR?
Yes, if the gift is taxable, it must be declared under the “Income from Other Sources” section of your ITR. Even if the gift is exempt, it is advisable to disclose it under the “Exempt Income” section in your return. This improves transparency and reduces the chances of scrutiny by the Income Tax Department later.
