Section 56(2)(x) – Tax on Gifts, Cash, and Property Received Without Consideration

🎁 Section 56(2)(x) – Tax on Gifts, Cash, and Property Received Without Consideration

Gifts are special—until they become taxable.

If you receive cash, movable assets, or immovable property without consideration or at a discounted price, you may have to pay tax on it under Section 56(2)(x) of the Income Tax Act.

This section was introduced to curb tax evasion through undervalued property deals or bogus gift transactions. But it also affects genuine gifts from friends, distant relatives, or well-wishers—if you’re not careful.

Let’s understand when a gift becomes taxable, how much tax applies, and what exemptions are available under Section 56(2)(x).

✅ What Is Section 56(2)(x)?

Section 56(2)(x) taxes any sum of money or property received by an individual or Hindu Undivided Family (HUF) without consideration (as a gift) or at a reduced value if the value exceeds a certain threshold.

This means:

• If you receive cash, movable property (like jewellery, shares, art), or immovable property (like land or flat) worth more than ₹50,000, and
• It is received from a non-relative without adequate consideration,
  Then the value of such gift becomes taxable under "Income from Other Sources".

This section applies regardless of your income slab, and tax is calculated as per applicable rates.

🎁 What Types of Gifts Are Covered?

• Without consideration: Taxable if stamp duty value > ₹50,000
• With consideration: Taxable if difference between stamp duty value and consideration > ₹50,000 or 10% (whichever is higher)

👨‍👩‍👧‍👦 Who Is a "Relative" for Gift Tax Exemption?

Gifts from specified relatives are fully exempt, even if the value exceeds ₹50,000. Relatives include:

• Spouse
• Brother/sister (of individual or spouse)
• Brother’s/sister’s spouse
• Lineal ascendants/descendants (e.g., parents, grandparents, children)
• Spouse of lineal ascendants/descendants

💡 Gifts from friends, cousins, or distant family members are not exempt unless covered under specific clauses.

🧾 Example of Taxable Gift Under Section 56(2)(x)

Example 1 (Cash Gift):
You receive ₹60,000 from a friend on your birthday.

• Since it exceeds ₹50,000 and the donor is not a relative →
  Entire ₹60,000 becomes taxable under Income from Other Sources.

Example 2 (Property Gift):
A builder sells you a flat for ₹35 lakh. The stamp duty value is ₹45 lakh.

• Difference = ₹10 lakh = 22.2% → more than ₹50,000 and 10% limit
• The ₹10 lakh difference becomes taxable income.

✨ Exemptions Under Section 56(2)(x)

The following gifts are not taxable:

1. Gifts from relatives (as defined above)
2. On the occasion of marriage
3. Under a will or inheritance
4. In contemplation of death of the payer
5. From local authority, trust, or institutions registered under Sections 10 or 12AB
6. Gifts received from an employer (up to ₹5,000 in value—above that taxed under salary)

📦 Where to Report in ITR?

• Use ITR-1, ITR-2, or ITR-3, depending on your income sources
• Report under “Income from Other Sources”
• Maintain a record of:
  • Gift deed or declaration (if applicable)
  • PAN of donor (if large amount)
  • Fair market valuation reports (for property or shares)

🧠 People Also Ask

❓ Is there a limit on how much I can receive tax-free as a gift?

Yes. For non-relatives, the total value of gifts cannot exceed ₹50,000 per year. If it does—even by ₹1—the entire amount becomes taxable.

❓ Is agricultural land also covered under Section 56(2)(x)?

Yes. Agricultural land is treated as immovable property under this section. Stamp duty value is considered for taxation.

❓ Is gift tax payable by the giver or receiver?

The receiver (donee) is liable to pay tax under Section 56(2)(x), not the person giving the gift.

❓ Are gifts received during festivals taxable?

Yes, unless they are from relatives or covered under marriage or inheritance exemptions, festival gifts above ₹50,000 are taxable.

⚠️ Common Mistakes to Avoid

• Assuming gifts from friends are tax-free
• Not verifying stamp duty value during property purchase
• Ignoring aggregate value from multiple small gifts
• Not declaring large gifts in ITR, leading to scrutiny or notices
• Confusing employer gifts with personal gifts

🎯 Final Thoughts from a CA’s Desk

“A gift may feel free—but if it’s not from a relative, it could cost you in tax.”

Whether you’re receiving cash for a wedding, a house from a cousin, or a painting from a friend—know the rules, check the exemptions, and always report high-value items in your ITR to stay compliant.

📞 Need Help Declaring Gifts or Understanding Tax on Property Deals?

At CallmyCA, we help:

• Check if your gift is exempt or taxable
• Calculate tax impact on undervalued property transactions
• Draft gift deeds to avoid scrutiny
• File compliant ITRs and avoid penalty

👉 Click here to book your gift tax consultation with CallmyCA