Gifts from relatives (parents, spouse, siblings, lineal descendants) are tax-exempt regardless of amount and should be reported under "Schedule Exempt Income" (Schedule EI) in the ITR for transparency. Gifts from non-relatives exceeding ₹50,000 annually are taxable under "Income from Other Sources" (Schedule OS). Always maintain a gift deed or bank records.
Understanding non-taxable gifts
Under the Income Tax Act, gifts received from specified relatives—such as parents, siblings, or spouses—are fully exempt from tax, irrespective of their value. Similarly, gifts received on special occasions like marriage or through inheritance are also exempt.
Taxpayers use IRS Form 709 to report gifts. Filing the form with the IRS is the responsibility of the giver, but it's only required in certain gift giving situations. Take for instance the check Grandma writes for your birthday each year.
You do not pay tax on a cash gift, but you may have to pay tax on any income that the cash gift generates.
According to the IRS, a gift occurs when you give property (like money) without expecting anything in return. If you gift someone more than the annual gift tax exclusion amount ($17,000 in 2022), the giver must file Form 709 (a gift tax return).
Fortunately, gifts received from relatives—including parents—are completely tax-free. Thus, if your parents gift you ₹25 lakh, you will not have to pay any tax on it. However, it is advisable to maintain proper documentation to avoid any future tax scrutiny.
HMRC can impose financial penalties when gifts are not declared correctly and the Executors may be liable to pay these penalties themselves. However, it is not always the Executors who are responsible for the payment of the penalties.
This unified exemption applies to both taxable gifts made during life and transfers at death. Annual gift tax exclusion: $19,000 per recipient (or $38,000 for married couples) is the maximum gift without tax. You can give this amount to an unlimited number of individuals without reducing your lifetime exemption.
For 2025 and 2026, the annual gift tax exclusion is $19,000. This means a person can give up to $19,000 to as many people as they without having to pay any taxes on the gifts. For example, a man could give $19,000 to each of his grandchildren in 2025 or 2026 with no gift tax implications.
Yes, you can give your son $100,000 tax-free in 2025 by utilizing the annual gift tax exclusion and your lifetime exemption, but you'll need to report the gift to the IRS on Form 709 since it exceeds the $19,000 annual limit, though you won't pay tax unless you exceed your much larger $13.99 million lifetime gift/estate tax exemption. The gift is considered yours (the giver) for tax purposes, not your son's.
Such Indian tax residents will need to login to the income Tax portal and select Form 26QE under E pay tax for filing their TDS return. For entities other than specified persons having TAN, Form 26Q needs to be filled up for reporting transactions on which TDS is applicable under section 194s.
So, for example, if you receive ₹5 lakh from your sister, or gift ₹10 lakh to your son, there is no tax liability on the gift amount in either case.
As per section (3) of the Gift Tax Act, 1958, gift tax was abolished in India in 1998. You will not be taxed on the gifts received from relatives. Gifts received (from relatives or non-relatives) on the occasion of marriage, under a Will, or in contemplation of death of the donor are tax-free.
US persons must file Form 3520 to report foreign gifts when: Total gifts received from nonresident alien individuals or foreign estates exceed $100,000 in a calendar tax year. Gifts received from foreign corporations or foreign partnerships exceed $19,570 during the taxable year (adjusted annually).
Cash gifts to family members
Helping out family with money is common, such as parents helping with a down payment, grandparents chipping in on tuition, or siblings lending a hand. In most cases, these are considered personal gifts and are tax-free.
Step-Up in Basis for Inherited Assets
One tax advantage of leaving assets after death is the step-up in basis. This provision allows heirs to inherit assets at their fair market value at the time of death, effectively resetting the capital gains tax to zero for any appreciation during the decedent's lifetime.
The annual gift tax exclusion provides additional shelter. The annual federal gift tax exclusion allows you to give away up to $19,000 each in 2025 to as many people as you wish without those gifts counting against your $13.99 million lifetime exemption.
A filing extension does not relieve you of paying the tax on the normal filing date. If you fail to file the gift tax return, you'll be assessed a gift tax penalty of 5% per month of the tax due, up to a limit of 25%.
Who pays the gift tax? The donor is generally responsible for paying the gift tax. Under special arrangements the donee may agree to pay the tax instead.
Where to Declare Gift Income in ITR?
There is no limit upto which your parents can gift to you. However, there is a limit of 1.50 lakh upto which money can be deposited in a PPF account taking your contribution and contributions made by your parents together.