NISM-Series-X-B: Investment Adviser (Level 2) · Income from Other Sources

Gift Taxation under Section 56(2)(x) Explained

Updated 11 October 2026

Section 56(2)(x) taxes money or property received without consideration, or for inadequate consideration, as Income from Other Sources in the receiver's hands. It applies when the total received in a year exceeds ₹50,000, unless the giver is a specified relative or an exempt occasion or source applies.

Understand Gifts Taxation under Section 56(2)(x)

Before this rule, a gift was a capital receipt and went untaxed. Section 56(2)(x) changed that. If you receive a gift, you may have to pay tax on it. The tax falls on the receiver, not the giver, and the amount is taxed under Income from Other Sources.

The section covers three kinds of receipts. First, money received without consideration. Second, immovable property (such as land or a building) received free or for less than its fair value. Third, specified movable property received free or for less than its fair value. Specified movable property means: shares and securities, jewellery, archaeological collections, drawings, paintings, sculptures, any work of art, and bullion. Other items such as a car or furniture are not in this list, so they are outside the section.

The three receipts are tested under separate clauses of the section: clause (a) for money, clause (b) for immovable property and clause (c) for specified movable property. You do not pool all receipts into one total. Reading the ₹50,000 test as an aggregate of every receipt is wrong.

The ₹50,000 threshold is the key test, but it works differently by asset. For money, tax applies only if the aggregate received during the previous year exceeds ₹50,000. For specified movable property received free, the aggregate fair market value of all such items received in the year is compared with ₹50,000. Money and movable property are aggregated separately. For immovable property received free, each property is tested on its own: it is taxable only if its stamp duty value exceeds ₹50,000. Once the test is crossed, the whole amount is taxable, not just the excess. For property bought for a price, the tax applies only if the stamp duty value exceeds the price by more than the higher of ₹50,000 and 10% of the price.

Value is measured differently by asset. For immovable property, use the stamp duty value. For a gift of immovable property, the stamp duty value on the date of registration is used. For a purchase, if the agreement date differs from the registration date and the price was paid by account payee cheque, bank draft, electronic clearing system through a bank account or another prescribed electronic mode on or before the agreement date, the stamp duty value on the agreement date is used. If the price was not paid in one of these ways by then, the registration date value applies. For shares and securities, the fair market value is determined under Rules 11U to 11UAA of the Income-tax Rules. Rule 11UA applies to unquoted equity shares only. Quoted shares and securities are valued by reference to stock exchange prices as those rules provide. For the other specified movable items, use fair market value. If a specified movable item is bought for less than its fair market value, the difference is taxable only if it exceeds ₹50,000.

Many gifts are exempt. The main exemptions are:

gifts from a specified relative
gifts received on marriage of the individual
property received under a will or by inheritance
receipt in contemplation of death of the payer or donor
gifts from a local authority
gifts from a fund, foundation, university or other educational institution, or hospital or other medical institution (as specified in the Act)
gifts from a trust or institution registered under section 12A or 12AB, or covered by section 10(23C)
gifts from a trust created solely for the benefit of the individual's relatives

The exemption depends on who gives or on the occasion, not on the amount. But a gift from a relative is exempt only if the giver is a relative as defined in the Act.

Key formulas to remember

Money received without consideration: Taxable if aggregate in the year > ₹50,000; then the full amount is taxed; Not just the excess over ₹50,000. If the total is exactly ₹50,000 or less, nothing is taxed. Money (clause a) is aggregated separately from movable property (clause c).
Immovable property received free: Taxable = stamp duty value, if stamp duty value of that property > ₹50,000; Immovable property is tested under its own clause (b). Each property is tested separately, not added to money or other receipts. For a gift, the stamp duty value is taken on the date of registration.
Immovable property for inadequate consideration: Taxable = stamp duty value − consideration, if the difference > higher of ₹50,000 or 10% of consideration; If the difference is above the limit, the whole difference is taxed. If the agreement date differs from the registration date and the price was paid by account payee cheque, bank draft, electronic clearing system through a bank account or other prescribed electronic mode on or before the agreement date, the stamp duty value on the agreement date is used. Otherwise the registration date value applies.
Movable property received free: Taxable = fair market value, if aggregate FMV of specified movable items received in the year > ₹50,000; Only specified items: shares and securities, jewellery, archaeological collections, drawings, paintings, sculptures, works of art, bullion. FMV of shares and securities is determined under Rules 11U to 11UAA (Rule 11UA applies to unquoted equity shares; quoted shares and securities use stock exchange prices as the rules provide).
Movable property for inadequate consideration: Taxable = FMV − consideration, if the difference > ₹50,000; The 10% rule applies to immovable property, not to movable property.
Head of income: Taxed under Income from Other Sources in the receiver's hands; Taxed at slab rates.
Exempt sources: Specified relatives; marriage of the individual; property received under a will or by inheritance; receipt in contemplation of death of the payer or donor; local authority; specified funds, universities, educational institutions and hospitals; trusts or institutions under section 12A/12AB or 10(23C); trust created solely for relatives; Exemption is by giver or occasion, regardless of the amount. The giver must fit the Act's definition.

How to solve Gifts Taxation under Section 56(2)(x) questions

Use the same order for every question on gifts. It stops you from missing an exemption or applying the wrong limit.

1Identify the receiver and the asset: money, immovable property, or specified movable property. A car or furniture received free is outside the section.
2Check whether the receipt is without consideration or for inadequate consideration.
3Check exemptions first: is the giver a specified relative, is it a marriage gift to the individual, an inheritance or will, or from an exempt institution? If yes, the answer is nil.
4If no exemption applies, find the value: stamp duty value for immovable property, fair market value for movable property.
5For free receipts, test each type against ₹50,000. Add up the money received in the year. Add up the fair market value of specified movable items received in the year. Test each immovable property separately on its own stamp duty value. For inadequate consideration, compute the difference and apply the correct limit.
6If the limit is crossed, tax the full amount under Income from Other Sources. Do not deduct ₹50,000.
7Add the amount to total income and tax it at slab rates.

Quickest way: Three-question filter

When to use it: Use it for one-line MCQs where options are nil, ₹50,000, or the full amount.

Question 1: Is the giver a specified relative, or is it a marriage or inheritance gift? If yes, answer nil.
Question 2: Is the asset money or specified movable or immovable property? If not, nil.
Question 3: For a free receipt, is the money total, the total FMV of specified movable items, or the stamp duty value of the immovable property above ₹50,000? For immovable property bought for a price, is the stamp duty value above the price by more than the higher of ₹50,000 and 10% of the price? If yes, the full value (or the full difference) is taxable. If no, nil.

Common mistakes in Gifts Taxation under Section 56(2)(x)

Taxing only the excess over ₹50,000.
Students treat ₹50,000 as an exemption limit like a deduction.
Fix: It is a threshold. Once crossed, the whole amount is taxed.
Taxing a gift from a relative because it is large.
Students link tax with amount only.
Fix: Gifts from specified relatives are exempt without any monetary limit.
Assuming a friend or cousin counts as a relative.
Everyday meaning of relative is wider than the Act.
Fix: Use the definition in the Act. Check the list of specified relatives; if the giver is not on it, the gift is not exempt on that ground.
Using market value instead of stamp duty value for land or buildings.
Students assume the market price is the benchmark.
Fix: For immovable property, the stamp duty value is the basis.
Applying the 10% tolerance to movable property.
Students mix the two inadequate-consideration rules.
Fix: The higher of ₹50,000 and 10% applies to immovable property. For movable property, the limit is ₹50,000.
Taxing the giver.
Students recall the old gift-tax idea.
Fix: Under section 56(2)(x) the receiver is taxed.

Worked examples

Example 1

During the year, Rohan receives ₹30,000 from a friend on his birthday and ₹35,000 from another friend as a gift. Neither is a relative. What is taxable under section 56(2)(x)?

Show the solution

Neither giver is a relative and neither occasion is exempt.
Both are money received without consideration.
Aggregate = ₹30,000 + ₹35,000 = ₹65,000.
₹65,000 exceeds ₹50,000, so the threshold is crossed.
The whole amount is taxable, not the excess.

Answer: ₹65,000 is taxable under Income from Other Sources.

Example 2

Meera buys a plot for ₹10,00,000 from an unrelated seller. Its stamp duty value on the date of registration is ₹12,00,000. What is taxable in Meera's hands?

Show the solution

Immovable property is bought for consideration lower than stamp duty value.
Difference = ₹12,00,000 − ₹10,00,000 = ₹2,00,000.
10% of consideration = ₹1,00,000.
Higher of ₹50,000 and ₹1,00,000 = ₹1,00,000.
Difference ₹2,00,000 is more than ₹1,00,000, so the section applies.
The whole difference is taxed.

Answer: ₹2,00,000 is taxable as Income from Other Sources.

Exam tips

Read the giver first. If it is a specified relative or a marriage or inheritance gift, the answer is nil whatever the amount.
Watch for options like ₹15,000 (excess over ₹50,000 calculated wrongly). The correct answer is the full amount when the limit is crossed.
Note whether the question says aggregate in the year. Add up money received from non-exempt sources, and add up specified movable items separately. Test each immovable property on its own stamp duty value.
For land or buildings bought for a price, hunt for the words stamp duty value. Apply the higher of ₹50,000 or 10% of the price to the excess of stamp duty value over the price.
Check whether the asset is on the list of specified movable items. Cars and furniture are traps.

Practice questions from Income from Other Sources

Gifts Taxation under Section 56(2)(x): frequently asked questions

Who pays tax on a gift under section 56(2)(x)?

The receiver pays. The amount is added to the receiver's income under Income from Other Sources and taxed at slab rates. The giver is not taxed on the gift under this section.

Is a gift from a relative taxable above ₹50,000?

No. Gifts from specified relatives are exempt regardless of the amount. The relative must fall within the list given in the Act. Gifts from other specified sources, such as a trust created solely for relatives or a trust registered under section 12A/12AB, are also exempt.

Is a gift received on marriage taxable?

A gift received by an individual on the occasion of their own marriage is exempt. Gifts to a guest or to someone else's marriage do not qualify.

Is the ₹50,000 an exemption or a threshold?

It is a threshold. If total taxable receipts in the year are ₹50,000 or less, nothing is taxed. If they exceed it, the entire amount is taxed.