Receipt of gifts- Wheel Chart of Relatives

Gifts from persons other than a relative are taxable if their value in the aggregate exceeds Rs. 50000 during the financial year. Relative’s from whom gifts can be received can be understood from the following wheel chart. Sourcing of gifts from any other person would be taxable on the gross value as income from other sources.

It must however be remembered that for the purpose of exemption relationship of the donor should be considered with reference to the donee even when he or she is a minor as the Mumbai bench of

ITAT in Assistant Commissioner of Income-tax 14(3), Mumbai v. Lucky Pamnanias (2011) 129ITD489 held that a minor is also to be treated as 'the individual' for s. 56(2) import. In this case the assessee claimed exemption for gifts received by his minor sons from assessee's uncle to which the bench remarked that minors having received gift, relationship of the donor should be with reference to the minor who is to be treated as 'the individual'. With reference to the minor the donor is not a brother or sister of either of the parents and he cannot even be considered as a lineal descendant so that no exemption was allowed. The assessee's deeming provision theory u/s 64 also had fallen flat in this case.

Also it must be understood that receipt by way of gift must be genuine as these are often subject to scrutiny. In other words the donor must have the financial capacity to make the gift and it must coincide with some occasion or requirement or happening such as a minor turning major, on the occasion of birthdays etc.

Where the amounts are significant it is better to retain the following documents as evidence: