Introduction
Gifting is a common practice in India, whether it is for weddings, birthdays, festivals, or other special occasions. However, the government has tightened regulations around the taxation of gifts under the new Income Tax Bill 2025. This article provides a comprehensive guide on how different types of gifts are taxed under the new law, exemptions available, and the penalty imposed on gifts received in cash.
Understanding Gift Taxation Under the Income Tax Bill 2025
The New Income Tax Bill 2025 has clearly outlined the taxation rules for gifts under Section 92(2)(m). As per the law, gifts are categorized into:
- Monetary gifts (cash, bank transfers, etc.)
- Immovable property (land, houses, etc.)
- Movable property (jewelry, shares, digital currency, etc.)
The taxation of these gifts depends on who is giving the gift, the value of the gift, and the mode of transfer.
Taxability of Different Types of Gifts
1. Tax on Cash Gifts
- If you receive more than ₹50,000 in a financial year from non-relatives, the entire amount is taxable as Income from Other Sources.
- If the total amount is ₹50,000 or less, no tax is applicable.
- However, cash gifts received from relatives (as defined under the law) are fully exempt.
2. Tax on Immovable Property Gifts
- If you receive land or a house without any consideration and the stamp duty value exceeds ₹50,000, the full value of the property is taxable.
- If you buy a property at a price much lower than the stamp duty value, and the difference is more than ₹50,000 or 10% of the purchase price (whichever is higher), the excess amount is taxable.
3. Tax on Movable Property Gifts
Movable assets such as jewelry, shares, securities, bullion, paintings, and digital currency are also taxable under the new bill.
- If the total fair market value of such gifts exceeds ₹50,000, the entire value is taxable.
- If the property is purchased at a price lower than its market value, and the difference exceeds ₹50,000, the excess is taxable (if the difference is more than 10% of the stamp duty value of the property).
Exemptions from Gift Tax
Certain gifts are exempt from taxation, even if they exceed the ₹50,000 limit. These include:
- Gifts from Relatives : Gifts from close relatives such as parents, siblings, spouses, and lineal ascendants or descendants are not taxable.
- Gifts Received on Marriage : Any gifts received on the occasion of marriage are fully exempt from tax.
- Gifts Received Through a Will or Inheritance : Gifts received under a will or inheritance are not taxable.
- Gifts from Local Authorities or Registered NGOs :
Donations or gifts received from the government, local authorities, or registered charitable trusts are tax-free. - Gifts in Contemplation of Death
Gifts received before the death of the donor (as part of estate planning) are exempt.
Penalty on Gifts Received in Cash
Under Section 186 of the New Income Tax Bill 2025, there are strict limits on cash transactions. The law states that:
- A person cannot receive ₹2 lakh or more in cash from one person in a single day.
- A person cannot receive ₹2 lakh or more in cash for a single transaction.
- A person cannot receive ₹2 lakh or more in cash for multiple transactions related to a single event/occasion.
Penalty Under Section 451
If any person violates the above rules, the Assessing Officer can impose a penalty equal to the amount received in cash.
For example:
- If you receive ₹3 lakh in cash as a wedding gift from a friend, you may have to pay a penalty of ₹3 lakh.
- If a business receives ₹5 lakh in cash for services, they may face a penalty of ₹5 lakh.
Key Takeaways
- Gifts above ₹50,000 from non-relatives are taxable.
- Certain exemptions exist, such as gifts from relatives, wedding gifts, and inheritance.
- Cash gifts exceeding ₹2 lakh are subject to penalties under Section 186.
- Gifts of immovable and movable property are also taxable if their value exceeds ₹50,000.
- Digital currency and NFTs are now considered taxable gifts under the law.
Frequently Asked Questions (FAQs)
1. Are gifts received from friends taxable?
Yes, if the total value of gifts from a friend exceeds ₹50,000 in a financial year, the full amount is taxable.
2. Can I receive a wedding gift in cash?
Yes, but if the cash amount exceeds ₹2 lakh from a single person, it may attract a penalty under Section 451.
3. Is digital currency received as a gift taxable?
Yes, cryptocurrencies and NFTs are now taxable under the new law if their market value exceeds ₹50,000.
4. How can I avoid tax on gifts?
- Accept gifts only from relatives (exempted under the law).
- Ensure cash gifts do not exceed ₹2 lakh from one person.
- Use proper documentation for high-value gifts.
5. What happens if I receive a property for free?
If the stamp duty value of the property is more than ₹50,000, it is fully taxable unless exempted.
6. Can the tax department question large gifts?
Yes, the Income Tax Department can ask for proof of gifts, and any unexplained gifts may be considered undisclosed income.
Conclusion
The New Income Tax Bill 2025 has introduced clear guidelines on gift taxation and strict penalties on cash gifts. Understanding these rules can help individuals plan their finances better and avoid unnecessary tax liabilities. If you regularly receive or give gifts, ensure proper documentation and compliance to avoid penalties.
