1. Spouse 2. Brother or sister 3. Brother or sister of the spouse 4. Brother or sister of either of the parents of the individual 5. Any lineal ascendant or descendent(A lineal descendant is a person who is in direct line to an ancestor, such as child, grandchild, great-grandchild and on. Similarly, a lineal ascendant is parent, grandparent, great-grandparent and so on.) 6. Any lineal ascendant or descendent of the spouse 7. Spouse of the person referred to in (2) to (6)
Some tests when receiving gift from relatives
Thus, a gift received by an individual from his spouse, or from his brother or sister, or from the spouse’s brother or sister, parents, or from any lineal ascendant or descendant of oneself or one’s spouse would normally be fully tax-exempt. Similarly, any gifts of any amount whatsoever received from the spouses of any of these persons would also be completely exempt fromincome tax.
For example, if Mr. X receives a gift of Rs. 3,00,000 in cash from his brother-in-law, that is, his spouse’s brother, it would be exempt since the brother or sister of the spouse comes within clause (3) of the aforesaid explanation.
Hence, whenever you receive any gifts from relatives you must carefully apply the test to ascertain whether the person concerned falls within one of the seven categories as above referred.
From Non-Relatives If a person who makes a gift does not fall within any of the above categories, then he would be considered as a non-relative and gifts from such people would be exempt only up to the extent of Rs. 50,000 aggregate in a financial year.
Note: It may be noted that since a Hindu Undivided Family can’t have relatives, any gifts received by it in excess of Rs. 50,000 in a year would be liable to full income tax.
2) Tax-Exempt Gifts from Other Persons
Besides gifts received from a relative or on the occasion of an individual’s marriage, the following are the other gifts which are completely exempt from tax as provided in the proviso to Section 56(2)(vi) of the I.T. Act:
1. Gift received under a Will or by way of inheritance;
2. Gift in contemplation of death of the donor;
3. Gift from any local authority;
4. Gift from any fund or foundation or university or other educational institution or hospital or any trust or any institution referred to in Section 10(23C); and
5. Gift from any trust or institution, which is registered as a public charitable trust or institution under Section 12AA.
Thus, scholarships, stipends or charities received from a charitable institution would be completely exempt from income tax in the hands of the recipients without any limit provided the trust or institution giving the charity is registered under Section 12AA. Likewise, all gifts under a Will, and all amounts received on the death of a person as a part of the inheritance are fully exempt fromincome tax.
Some Important Point While Receiving Gifts
1. Always take gift by cheque or draft .
2.Get a gift deed mentioning the relationship.Its always better to mention PAN number of the Donor in the gift deed.
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