Festive seasons like Diwali and New Year bring joy, celebrations, and gifts. But did you know that not all gifts are tax-free? As a taxpayer, it’s important to know when a gift becomes taxable, how much tax you may owe, and how to stay compliant.
What is a “Gift” under Income Tax Law?
A “gift” means receiving money or property—immovable (land, building) or movable (jewellery, shares, artwork)—without paying full value.
Examples include:
- Cash or cheque from a friend, employer, or acquaintance
- Jewellery, paintings, shares, or valuables received free
- Property (land or house) given without adequate payment
When Are Gifts Taxable?
From Non-Relatives
If the total value from non-relatives in a financial year exceeds ₹50,000, the entire amount becomes taxable as “Income from Other Sources.” This is cumulative—small gifts add up.
For property gifts, if the stamp duty/market value exceeds ₹50,000, the entire amount or difference (if given at a discounted price) is taxable.
From Relatives
Gifts from specified relatives—parents, spouse, siblings, children, and lineal ascendants/descendants—are fully exempt, regardless of value.
From Employer
If your employer gives you Diwali or New Year gifts:
- Up to ₹5,000 in a year is exempt
- If value exceeds ₹5,000, the entire amount is taxable as salary perquisite
- Assets like cars or bikes are taxed under salary income, not gift rules
What does it mean for you?
- Watch the ₹50,000 limit
Individually small gifts may seem harmless, but once combined, crossing the limit makes the entire value taxable. - Differentiate between relatives and non-relatives
Gifts from relatives are always safe. But gifts from friends, colleagues, or neighbours add up toward the ₹50,000 threshold. - Employer gifts aren’t always free
That Diwali hamper, voucher, or gadget worth over ₹5,000 will be added to your salary and taxed. - High-value or property gifts attract scrutiny
For land, jewellery, or shares, valuation matters. Even discounted sales can trigger tax on the difference. - Keep documentation
Gift deeds, valuation reports, or employer statements help in case of tax queries. - No separate gift tax
India doesn’t levy a stand-alone “gift tax.” Gifts are taxed under the Income Tax Act (section 56) and reported in your normal ITR. Both old and new regimes apply.
A Quick Scenario
Suppose you receive:
- ₹30,000 from a friend
- ₹25,000 from a neighbour
- Sweets worth ₹3,000
Total = ₹58,000. Since it crosses ₹50,000, the full ₹58,000 is taxable.
If the ₹30,000 came from your brother (a relative), only ₹25,000 counts. As it’s below ₹50,000, no tax applies.
The Final Word
Diwali and New Year gifts bring happiness, but some can carry hidden tax obligations. Remember: ₹50,000 is the key limit for non-relatives, gifts from relatives are always exempt, and employer gifts above ₹5,000 are taxable. Awareness now will save you stress during filing.