New Delhi:
In a landmark ruling, the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has declared that gifts up to ₹20 lakh received from a non-resident brother are exempt from taxation.
This ruling clarifies that under Indian tax laws, gifts from relatives, including siblings, are not subject to tax.
Understanding Tax Exemptions on Gifts
As per Section 56(2)(x) of the Income Tax Act,
gifts received from close relatives like siblings are not considered taxable income.
Generally, gifts exceeding ₹50,000 from non-relatives are taxed as “income from other sources,” but exceptions exist for certain relationships, such as between siblings, or for specific occasions like weddings or inheritance.
The Case of Salam and the ITAT Ruling
The ITAT’s decision came in the case of Salam, who received a ₹20 lakh gift from his brother, a long-time resident of Dubai.
Initially, the Income Tax Department treated this gift as taxable income,
and the Income Tax Commissioner upheld this decision due to insufficient proof from Salam.
However, Salam appealed to the ITAT, providing comprehensive evidence including his brother’s bank statements, passport, and visa, proving the gift was genuine.
After reviewing the evidence, ITAT member Prashant Maharshi ruled that the ₹20 lakh received by Salam was indeed non-taxable income, setting a precedent for similar cases in the future.
