Summary Notes: Income from Other Sources & Gift Taxation (Section 56(2)(x))
1. Introduction
Any income not chargeable under the heads "Salaries," "House Property," "Business/Profession," or
"Capital Gains" is taxed under "Income from Other Sources."
2. Taxation of Gifts (Section 56(2)(x))
Types of Property Covered
Money (Cash)
Movable Property: Shares, securities, jewelry, paintings, sculptures, etc.
Immovable Property: Land or buildings
Tax Regime
General Rule: If aggregate value of gifts from a non-relative exceeds ₹50,000 in a year, the entire
amount/value is taxable as "Income from Other Sources."
Property received for inadequate consideration: The taxable amount is the difference between Fair
Market Value (FMV)/Stamp Duty Value (SDV) and the consideration, if exceeding ₹50,000.
Exemptions (Gift Not Taxable If Received)
From a relative (as per Income Tax definition)
On the occasion of marriage of the individual (not other occasions like anniversaries or birthdays)
By will or inheritance
In contemplation of death
From certain institutions (trusts, medical institutions, etc.)
From specified transactions referred in Section 47
Definitions of Relative
For Individuals: Spouse, siblings, siblings of spouse, siblings of parents (and their spouses), lineal
ascendants/descendants (and their spouses)
For HUFs: Any member of the HUF
3. Taxability in Typical Scenarios
Scenario Taxable Reason
or Not?
Cash Gift > Taxable Amount is taxable under
₹50,000 from IFOS if total exceeds
non-relative ₹50,000
Cash Gift on Not Exempt when received on
own marriage taxable individual's own marriage
Scenario Taxable Reason
or Not?
Movable Taxable FMV is taxable if from
property as gift, non-relative
FMV > ₹50,000
Immovable Taxable SDV is taxable if from
property as gift, non-relative
SDV > ₹50,000
Property for Taxable Taxable to extent of
low difference (FMV/SDV less
consideration, consideration)
difference >
₹50,000
Gift from Not Covered under exemption
relative taxable
Car as gift Not Car is not included in
taxable 'property' definition under
section 56(2)(x)
Gift on Taxable Only marriage gifts
occasion other exempt;
than marriage birthdays/anniversaries
taxable if from non-
relative
4. Practical Examples
Gifts from Friends: Taxable unless aggregate is ≤ ₹50,000.
Gifts from Employer: Taxed under "Salaries" if value exceeds ₹5,000.
Jewelry, Shares, Art, etc.: Taxable if from non-relative and value conditions met.
Immovable Property Gift: Full SDV taxable if from non-relative and SDV > ₹50,000.
5. Special Provisions
Business/Profession
If any gift/benefit/perquisite is received due to business or profession, it's always taxable under
"Profits and Gains of Business or Profession" (PGBP).
Cost of Acquisition (Section 49(4))
If asset taxed under section 56(2)(x), cost of acquisition becomes FMV/SDV considered for tax
under IFOS.
6. Sale of Gifted Property & Capital Gains
If property was taxed under section 56(2)(x), then on later sale, FMV/SDV on date of receipt (not
original owner's cost) is deemed cost for computing capital gain.
If received from relative (and thus not taxed under 56(2)(x)), original owner's cost is considered.
7. Illustrative Cases from Practice Questions
Gift on Marriage: Not taxable for recipient; gifts on other family events are taxable if from non-
relatives.
Gift from Mother's Cousin: Not exempt as 'relative'; taxable if conditions met.
Gift of Property for Business: Not taxed under 56(2)(x), but considered stock in trade.
These notes cover the main points from the PDF on taxation of gifts and other income under Indian tax
law, particularly Section 56(2)(x) of the Income-tax Act, 1961
