Under Section 56(2)(x), any sum of money or specified property received without consideration (or for inadequate consideration) exceeding Rs.50,000 in a year is taxable as income from other sources. Gifts from relatives, on marriage, under a will or inheritance, and certain other receipts are exempt.
The taxing provision
Section 56(2)(x) taxes the recipient on:
- Money — if the aggregate received without consideration exceeds Rs.50,000, the whole amount is taxable.
- Immovable property — if received free, the stamp-duty value (above Rs.50,000); if for inadequate consideration, the shortfall beyond the tolerance band.
- Specified movable property (shares, jewellery, art, etc.) — the fair market value above Rs.50,000.
The exceptions
| Receipt | Taxable? |
|---|---|
| From a 'relative' (as defined) | Exempt |
| On the occasion of marriage of the individual | Exempt |
| Under a will or by inheritance | Exempt |
| From a local authority / specified fund / trust | Exempt |
| From a non-relative above Rs.50,000 | Taxable |
'Relative' includes spouse, siblings, siblings of spouse/parents, lineal ascendants/descendants and their spouses — a defined list.
Worked example
An individual receives Rs.80,000 cash from a friend (non-relative) and Rs.2,00,000 from a brother. The Rs.2,00,000 from the brother is exempt (relative); the Rs.80,000 from the friend exceeds Rs.50,000, so the entire Rs.80,000 is taxable as income from other sources.
Practical points
- The Rs.50,000 threshold is aggregate per category per year, and once crossed the whole amount is taxable.
- For property, the stamp-duty value (immovable) or FMV (movable) governs.
- Maintain gift deeds and proof of relationship to support exemption.
- Loans are not gifts, but unexplained credits can attract Section 68.
Key takeaways
- 56(2)(x): free/under-valued money or property above Rs.50,000 is taxable.
- Once Rs.50,000 is crossed, the whole amount is taxed.
- Relatives, marriage, will and inheritance receipts are exempt.
- Property valued at stamp value (immovable) or FMV (movable).