23/04/2026
Income-tax returns: Here's how to declare gifts, mutual fund and share transfers in ITR form
There are multiple occasions where you may give or receive financial gifts to family, and India's Income-Tax laws have provisions that allow such transactions between family members to be exempted from taxes. However, in order to avoid misuse of “gifts” for tax evasion, the laws also prescribe declaration of such transfers and gifts in your income tax returns (ITR) while filing your taxes.
What are financial gifts, transfers?
In India, you are allowed to transfer assets (gold, property), cash, mutual fund units, and equity shares to family as gift, which is considered to be tax-free subject to certain terms. Here, to qualify for exemption, the recipient must be family.
Further, for gifts or transfers to third party recipients, all transfers over ₹50,000 in a financial year are subject to taxation for the full amount.
Tax exemption for gifts: All you need to know
▪ Gifts from to and from family (spouse, parents, children, siblings, and linear relatives) are fully exempt irrespective of the amount involved. This also applies to gifts given for marriage and as inheritance.
▪ If value of gifts to non-relatives (acquaintances, friends and other third parties) exceeds ₹50,000, the entire amount is taxable for the receiver.
▪ The gift must be declared under Section 56(2)(x) of the Income-Tax Act (ITA). On your ITR form this will come the head “Income from Other Sources.”
▪ Further, for cash gifts from employers, this is considered under Salaries head; while gift in kind will be taxable if the value exceeds ₹50,000.
How to disclose gifts in ITR?
Disclosure of gifts must be done under Section 56(2)(x) by the recipient in Schedule OS of your ITR 2 or 3.
Why should you disclose gifts / transfers in ITR?
▪ It is mandatory to disclose income in ITR and doing so ensures transparency. For high-value transfers especially, this ensures your tax profile is in congruence with your Annual Information Statement (AIS) and prevents mismatch alert for tax authorities.
▪ It is advisable to maintain bank statements, demat account statements, property papers, gift deed and proof of relationship documents, in case a transactions triggers tax notice.
▪ The tax department will also consider profile of donor to check if the gift given is affordable in accordance with past creditworthiness. This is a means to eliminate black money laundering through gifts.
What is Section 56(2)(x) of ITA?
Section 56 of the ITA oversees taxation of Income from Other Sources (i.e. dividends, lottery, income from securities, life insurance maturity, gifts, deeds, etc.) that can't be categorized under other heads such as capital gains, salary or rent.
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