Gifts and inheritance
In this chapter: Gift tax framework — Section 56(2)(x) · Inheritance — currently no tax, but watch this space
Gifts to specified relatives (spouse, parents, children, siblings, lineal ascendants/descendants) are tax-exempt. Gifts to non-relatives above ₹50,000 per year are taxable as income at slab rates. Inheritance: India has no estate duty currently (abolished 1985); inherited assets carry the deceased's cost basis to the heir.
Section 56(2)(x): non-relative gifts above ₹50K aggregated per year are fully taxable. Relatives exempt: parents, children, siblings, spouse, spouse's parents/siblings, lineal ascendants/descendants. HUF members get specific exemption rules. Specified occasions (marriage of recipient): any-source gifts exempt. Cash gifts above ₹2L between non-relatives violate Section 269ST (penalty). Gifts of property (real estate, jewellery, art): valued at fair market value; recipient pays tax if > ₹50K to non-relative. Inheritance: no tax on receipt; capital gains tax applies when inherited asset is sold (cost basis = original cost to deceased; holding period includes deceased's holding).
A nuanced angle: clubbing of income. Gifts to spouse or minor children that generate income — the income is clubbed back to donor's tax. So gifting ₹50L to spouse to invest doesn't avoid tax; spouse's investment income is taxed in donor's hands. Exception: gift to major children (over 18) — their income taxed in their hands. This makes gifting to adult children an effective family-tax-planning tool. Gift to HUF: clubbing applies if from member; not from outside. Also: estate duty repeal can be reversed politically — sophisticated estates plan for the contingency via trust structures even today.