Taxes on Gifts and Inheritance

How India taxes gifts of money and property, why gifts from relatives are exempt, and why there is no inheritance tax but future sales can be taxed.

India has no separate gift tax or inheritance tax, but gifts can still be taxed as income in some cases.

Gifts from relatives

Gifts from relatives, as defined in tax law, are fully exempt, regardless of amount. Relatives include:

Spouse.
Parents, children, grandchildren.
Siblings and their spouses.
Siblings of parents and of the spouse, among others.

Gifts from non-relatives

If you receive gifts from non-relatives worth more than 50,000 rupees in a year in total, the entire amount is taxable as income.

Occasions

Gifts received on your marriage are exempt, even from non-relatives.

Inheritance

Money and property inherited under a will or by succession are not taxed when received. India abolished estate duty in 1985.

Future sales

When you sell inherited or gifted property, capital gains tax applies. The holding period and cost are generally taken from the previous owner.

Clubbing

If you gift money to your spouse or a minor child, income earned on it may be clubbed with your income for tax purposes, to prevent tax shifting.

The debate

Some economists propose reintroducing an inheritance tax in India to reduce wealth inequality; others argue it would be hard to enforce and could discourage saving.

The wedding gifts

A couple receives cash gifts from friends and relatives at their wedding worth 3 lakh rupees in total. All of it is exempt because gifts received on marriage aren't taxable.

Thinking large gifts are always taxed

Gifts from relatives and on marriage are exempt; only gifts from non-relatives above 50,000 rupees are taxed.

Key takeaways

Gifts from relatives are fully exempt.
Gifts from non-relatives above 50,000 rupees a year are fully taxable.
There is no inheritance tax; estate duty was abolished in 1985.
Selling inherited property triggers capital gains tax.