Income Tax : Gift from Brother in Law and Taxation under S.56 of Income-tax Act, 1961

Income Tax : Gift from Brother in Law and Taxation under S.56 of Income-tax Act, 1961

In a recent decision, the assessee was an individual and had received gift through NRE account from the spouse of his sister i.e. his brother-in-law. It was contended that the gift deed was made outside India in the USA and as per the Transfer of Property Act, the gift deed is not required in case of movable property. The transaction was executed through normal banking channel from one bank to another.

The term “relative” is defined in section 56 of the Income-tax Act, 1961. Thus, the spouse of the sister of the assessee is also covered as relative and since the assessee has filed the copy of bank account evidencing the source of gift, the same is not liable to be added in the income of the assessee. For the purpose of section 56 of the Act, there is no need or requirement of any gift deed and the Gift Tax Act is not in operation with effect from 01.10.1998.

Section 56 of the Act for exemption from assessing any sum received which exceeds ₹50,000/-, does not require a valid gift deed but it is provided in the section itself that if the amount is received from a relative as defined therein, the same is not liable to be assessed u/s 56 of the Act. That being so, the source of the amount being from the relative not being in question, the amount is not liable to be included in the total income of the assessee.

Since the necessary documentary evidence in support of the claim that the amount was received from the relative, there was no occasion to insist on a gift deed for excluding the amount received from the brother-in-law. The money has been received through banking channel. 

Case Reference : Deb Prasanna Choudhury v. ADIT [2025] GCtR 1656 (ITAT, Kolkata)