Taxation · Income from Other Sources

Gifts and Receipts Without or Inadequate Consideration

Updated 4 October 2026 · Fact-checked

Gifts received without or for inadequate consideration are taxed as Income from Other Sources in the receiver's hands. Money above ₹50,000 in a tax year is taxable in full. For property, the stamp duty value or fair market value is compared with the price paid. Gifts from relatives and on specified occasions are exempt.

Understand Gifts and Receipts Without or Inadequate Consideration

Earlier, a gift was not income because nothing was earned. The law now treats certain gifts as income so that people cannot move untaxed money or assets to each other. The receipt is taxed under Income from Other Sources.

Three kinds of receipt are covered. First, a sum of money received without consideration. Second, immovable property (land or building or both, that is a capital asset in the receiver's hands) received free or for less than its value. Third, other specified property received free or for less than its value. This means shares and securities, jewellery, archaeological collections, drawings, paintings, sculptures, any work of art, and bullion.

The value is measured differently for each kind. Money is taken at the amount received. Immovable property is valued at its stamp duty value (the value the government's registering authority adopts for stamp duty). Other property is valued at its fair market value (FMV).

The ₹50,000 test is applied differently for each kind:

Money received without consideration is tested on the aggregate received in the tax year.
Specified movable property received without consideration is tested on the aggregate FMV received in the tax year.
Immovable property received without consideration is tested separately for each receipt or transaction. You do not add different properties together.
Immovable property received for inadequate consideration: the limit is the higher of ₹50,000 and 10% of the consideration. It is tested on each transaction.
Other property received for inadequate consideration: the limit is ₹50,000 on the difference. It is tested on each item's difference.

The rules apply to any person who receives the benefit: individual, HUF, firm, company and others. If a partner gifts money to a firm, the firm is taxed if the limit is crossed.

On a later sale, the cost of the asset depends on how you got it. For a free receipt, the cost is the value taxed. For inadequate consideration, the cost is the consideration you paid plus the difference that was taxed. That total equals the stamp duty value or FMV.

Some receipts are exempt. Check the receiver and the giver for each one. The relative, marriage, will or inheritance, and contemplation-of-death exemptions apply whatever the amount. The exemptions for institutions and trusts apply to the receiver only for receipts from the givers named in the law:

A gift from a relative. This exemption is available only when the receiver is an individual or HUF. A firm or company cannot claim it.
A gift received on the occasion of the marriage of the individual receiver. An HUF or other receiver cannot claim this.
Receipts under a will or by inheritance.
Receipts in contemplation of the death of the payer.
Receipts from a local authority.
Receipts from a fund, foundation, university, other educational institution, hospital or other medical institution, or trust or institution covered by the specified exemption clauses, or from a trust or institution registered as charitable or religious under the prescribed provisions. The exemption holds only for receipts from these givers.
Receipts from a trust created or established solely for the benefit of a relative of the individual receiver.
Receipts in a transaction not regarded as a transfer for capital gains, for example certain gifts, partitions and amalgamations or demergers, whoever the receiver is.
Receipts by a firm, company or other person in a business reorganisation of the kinds specifically exempted, such as amalgamation, demerger and conversion of a firm or company.

Key rules to remember

Sum of money without consideration: If aggregate received in the tax year > ₹50,000, the whole amount is taxable; otherwise nil; Add all non-exempt sums from all persons in the tax year. It is a cliff: ₹50,000 exactly is not taxable, ₹50,001 makes the whole sum taxable.
Immovable property received without consideration: If stamp duty value > ₹50,000, taxable = stamp duty value; The whole value is taxed, not just the excess. Test each property or transaction separately; do not add different properties. It applies only to land or building held as a capital asset.
Immovable property for inadequate consideration: Difference = stamp duty value − consideration. Taxable only if difference > higher of ₹50,000 and 10% of consideration; then taxable = difference; The whole difference is taxed once the limit is crossed, not just the excess over the limit. Test each transaction separately.
Agreement date rule: Stamp duty value may be taken on the agreement date if the consideration was fixed on that date and part or full payment was made by a non-cash mode on or before that date; The mode must be account payee cheque or draft, electronic clearing system, or another prescribed electronic mode. Cash payment does not qualify.
Other property without consideration: If aggregate FMV of specified property > ₹50,000, taxable = aggregate FMV; Add all items received free in the tax year. Specified property is shares and securities, jewellery, archaeological collections, drawings, paintings, sculptures, works of art and bullion.
Other property for inadequate consideration: If FMV − consideration > ₹50,000, taxable = FMV − consideration; There is no 10% tolerance here. The ₹50,000 test is on each item's difference. Do not add the differences of different items.
Relative (for an individual): Spouse; brother or sister of the individual or of the spouse; brother or sister of either parent; lineal ascendants and descendants of the individual or of the spouse; and the spouse of each of these persons; For an HUF, any member of the HUF is a relative. Friends, cousins and in-laws beyond this list are not relatives.
Cost for later transfer: Free receipt: cost of acquisition = value taxed. Inadequate consideration: cost of acquisition = consideration paid + difference taxed (that is, the stamp duty value or FMV); Needed in capital gains questions. Do not use the taxed difference alone as cost when you paid part of the price.

How to solve Gifts and Receipts Without or Inadequate Consideration questions

Use the same routine for every question. It stops you missing an exemption or applying the wrong threshold.

1Identify the receiver (individual, HUF, firm, company) and list every receipt in the tax year 2026-27.
2Classify each receipt: money, immovable property, or specified movable property.
3Remove exempt receipts: from a relative, on your own marriage, under a will or inheritance, in contemplation of death, from a local authority, from the specified institutions and registered trusts, and in transactions not regarded as a transfer. Check the relationship against the list; remember a firm or company cannot claim the relative exemption, and only an individual can claim the marriage exemption.
4For money, add the remaining sums for the whole tax year. If the total exceeds ₹50,000, the full total is taxable.
5For immovable property, test each property or transaction separately. Find the stamp duty value (use the agreement date value only if the non-cash payment condition is met). For a free receipt, tax the full value if it exceeds ₹50,000. If you paid a price, compute the difference and compare it with the higher of ₹50,000 and 10% of consideration.
6For specified movable property, take the FMV. Free receipts: add the FMV of all items received in the tax year and tax the aggregate if it exceeds ₹50,000. Inadequate consideration: test each item's difference separately and tax that difference if it exceeds ₹50,000.
7Add the taxable amounts and show the total under Income from Other Sources. Add a line showing which items are exempt and why.
8If the question asks for later sale, find the cost of acquisition. For a free receipt it is the value taxed. For inadequate consideration it is the price paid plus the difference taxed.

Quickest way: Three-column scan for MCQs and written answers

When to use it: Use it when a question lists many receipts and you have about 8 to 10 minutes.

Draw three columns: Exempt, Money, Property. Put each receipt in one column with a one-word reason.
Check the giver first. Relative, marriage of the receiver, will, or an institution means exempt, so ignore the amount.
For money, add and compare with ₹50,000 once. For property, run the formula and write the working line by line.
For MCQs, eliminate options that tax only the excess over ₹50,000, since the law taxes the whole amount. Also eliminate options that apply the 10% tolerance to movable property, or that exempt a gift from a friend or cousin.
In written answers, state the rule, the working and the conclusion on separate lines: for example 'Stamp duty value ₹X − consideration ₹Y = ₹Z. Limit is higher of ₹50,000 and 10% of Y = ₹L. Z > L, so ₹Z is taxable.' This earns step marks even if one figure goes wrong.

Common mistakes in Gifts and Receipts Without or Inadequate Consideration

Taxing only the excess over ₹50,000.
Students treat ₹50,000 like an exemption limit in a slab.
Fix: Remember it is a threshold. If the aggregate exceeds ₹50,000, the entire amount is taxable.
Treating cousins, friends or in-laws as relatives.
Everyday meaning of relative is wider than the legal list.
Fix: Check the list: spouse, siblings, parents' siblings, lineal ascendants and descendants, spouse's siblings and lineal relatives, and their spouses. A cousin is not on it.
Exempting a gift because it was received on a wedding occasion without checking whose wedding.
Students read 'marriage' and stop.
Fix: The exemption is for gifts received on the receiver's own marriage. A gift on a child's wedding from a non-relative is not exempt on that ground.
Applying 10% tolerance to shares or jewellery.
The tolerance appears in the property rule and is carried over by habit.
Fix: The 10% test is only for immovable property. For movable property the test is the ₹50,000 difference.
Using the wrong value for immovable property or ignoring the agreement date.
Students use purchase price or market value instead of stamp duty value.
Fix: Use stamp duty value. Use the agreement date value only if the consideration was fixed on that date and some payment was made by a non-cash mode on or before it.
Allowing the relative exemption to a firm or company.
Students apply the exemption to every receiver.
Fix: The relative concept works for an individual or HUF receiver. A firm or company receiving without consideration above the limit is taxed unless another exemption applies, such as a business reorganisation.
Taking only the taxed difference as the cost of a part-paid asset.
Students remember 'taxed value becomes cost' and forget the price already paid.
Fix: For inadequate consideration, cost = price paid + difference taxed, which equals the stamp duty value or FMV. Only a free receipt has cost equal to the value taxed.

Worked examples

Example 1

Mr. Rohan, a resident individual, received the following in the tax year 2026-27: (a) ₹30,000 from a friend on his birthday; (b) ₹40,000 from his father's brother; (c) ₹25,000 from another friend; (d) ₹1,00,000 from friends on his own marriage; (e) ₹20,000 from a neighbour. Compute the amount taxable under Income from Other Sources.

Show the solution

(b) is from a relative (brother of his father), so it is exempt.
(d) was received on his own marriage, so it is exempt.
Non-exempt sums: (a) ₹30,000 + (c) ₹25,000 + (e) ₹20,000 = ₹75,000.
₹75,000 exceeds ₹50,000, so the whole ₹75,000 is taxable, not just the ₹25,000 excess.

Answer: ₹75,000 is taxable under Income from Other Sources. ₹1,40,000 is exempt.

Example 2

Ms. Meera, a resident individual, bought a plot of land from an unrelated person for ₹40,00,000 (stamp duty value ₹46,00,000). She also received gold jewellery from a friend for ₹20,000 when its fair market value was ₹80,000. Compute the amount taxable under Income from Other Sources. Assume no agreement date issue.

Show the solution

Land: difference = ₹46,00,000 − ₹40,00,000 = ₹6,00,000.
10% of consideration = ₹4,00,000. Higher of ₹50,000 and ₹4,00,000 is ₹4,00,000.
₹6,00,000 exceeds ₹4,00,000, so the whole difference of ₹6,00,000 is taxable. If the stamp duty value had been ₹43,00,000, the difference of ₹3,00,000 would be below the limit and nothing would be taxable.
Jewellery: FMV ₹80,000 − consideration ₹20,000 = ₹60,000. It exceeds ₹50,000, so ₹60,000 is taxable.
Total = ₹6,00,000 + ₹60,000 = ₹6,60,000.

Answer: ₹6,60,000 is taxable under Income from Other Sources (₹6,00,000 for the land and ₹60,000 for the jewellery).

Exam tips

Read the giver's name before the amount. Many questions are decided by whether the giver is a relative.
Show the threshold test as a written line, for example 'Difference ₹6,00,000 > ₹4,00,000, so taxable'. Step marks depend on it.
Keep a small table of exempt receipts with reasons. Examiners often include one or two exempt items as traps.
Watch for a firm or company as receiver, and for stamp duty value given on two dates, which signals the agreement date rule.
In MCQs, test the arithmetic on both the threshold and the whole-amount rule. Most wrong options tax only the excess.

Practice questions from Income from Other Sources

Gifts and Receipts Without or Inadequate Consideration in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Gifts and Receipts Without or Inadequate Consideration: frequently asked questions

Is a gift from a relative always tax-free?

Generally yes. It is exempt for an individual or HUF receiver from a listed relative (for an HUF, a member of the HUF), and there is no upper limit on the amount. A firm or company cannot claim this exemption. The income from the gifted asset may still be taxable or clubbed.

Is ₹50,000 an exemption limit?

No. It is a threshold. For money and for specified movable property received free, the aggregate for the tax year is tested. For immovable property, each property or transaction is tested separately. If the threshold is crossed, the whole amount is taxable. At ₹50,000 or less, nothing is taxable.

Which value is used for a gift of shares below fair market value?

Fair market value, as determined under the prescribed rules. For free receipts, the aggregate FMV of all specified property received in the tax year is taxed if it exceeds ₹50,000. For inadequate consideration, the difference between FMV and price is tested for each item and taxed if it exceeds ₹50,000.

How is the gifted property taxed when I sell it later?

For a free receipt, the value taxed is your cost of acquisition. If you paid a price that was inadequate, your cost is the price paid plus the difference taxed, which equals the stamp duty value or FMV. Holding period usually runs from the date you received it. Both points feed into the capital gains computation.