Gifts From Brother-In-Law: Allowed Or Awkward?

In India, gifts from relatives are generally exempt from tax, irrespective of their place of stay. However, gifts from non-relatives are taxable if the aggregate value of such sums received during the year is more than Rs. 50,000. So, can a brother-in-law give a gift to his sister-in-law without incurring tax liability? The answer is yes, as long as the gift is not in the form of immovable property, which may be subject to stamp duty charges. In the case of gifts of money, there is no maximum limit, and no tax liability for either party, although it is recommended to prepare a gift deed for record-keeping and to prove the genuineness of the gift if needed.

Gifts from relatives are tax-free

In the context of Indian tax laws, gifts from relatives are generally considered tax-free. According to the Income Tax Act, a relative includes a spouse, brother, sister, brother-in-law or sister-in-law, a parent's brother or sister, and any lineal ascendant or descendant. However, friends do not fall under the definition of 'relative', and gifts received from them are taxable. Additionally, gifts received on occasions like birthdays or anniversaries are also subject to tax. It is important to note that the exemption applies to gifts up to ₹50,000 in value; if the gift exceeds this amount, the entire sum becomes taxable.

In the United States, the concept of tax-free gifts is more nuanced. While gifts are not subject to income tax for the recipient, they can trigger gift tax implications for the giver if not executed correctly. The annual gift tax exclusion allows individuals to gift up to $19,000 per person in 2025 without incurring gift tax. This limit applies to the total value of gifts given to each person, rather than the number of gifts. For married couples, this exclusion doubles to $38,000 per recipient per year. It is important to note that any amount gifted above the annual limit is subtracted from the lifetime gift tax exclusion. In 2025, the federal gift and estate tax exemption is $13.99 million per person, which is the maximum amount that can be gifted or transferred in a lifetime tax-free.

The donor is typically responsible for paying the gift tax, but under special arrangements, the recipient may agree to assume this tax liability. Additionally, the gift tax return and filing requirements are essential to consider. If an individual gifts over $19,000 to a single person in a calendar year, they must report it to the IRS using Form 709. This form is also used to signify that spouses have agreed to split gifts if one spouse exceeds the per-person threshold in a given year.

Gifts to relatives are exempt from tax

In the context of tax, the term "relative" typically includes the following: spouse, brother or sister, brother or sister of the spouse, brother or sister of either of the parents, any lineal ascendant or descendant, any lineal ascendant or descendant of the spouse, and the spouse of the aforementioned persons. According to the Income Tax Act, gifts received from relatives are exempt from tax. This is outlined in Section 56 of the Act.

In India, gifts received up to ₹50,000 are completely tax-free. However, if the gift amount exceeds ₹50,000, the entire sum becomes taxable. For instance, if an individual receives ₹55,000 worth of gifts during a financial year, the full amount of ₹55,000 will be taxable under the head 'income from other sources'.

In the United States, the annual gift exemption is per "gifter," meaning married couples can gift up to $38,000 per recipient per year without incurring gift tax. Individuals can give up to $19,000 per year to as many people as they want without filing a gift tax return or paying gift tax. This amount is set to decrease to $13,610,000 in 2026. If gifts exceed the annual exclusion amount, it may reduce the tax-free amount that can be transferred through an estate in the future. Additionally, if the gifted assets generate income in the future, such as interest, dividends, or rent, this income will typically be taxed.

It is important to note that the donor is generally responsible for paying the gift tax. However, under special arrangements, the recipient may agree to pay the tax instead. Consulting a tax professional is recommended to navigate the complexities of gift taxes.

Tax liability on mother-in-law and brother-in-law

In India, gifts received from relatives are exempt from tax under Section 56 of the Income Tax Act. According to the IT Act, a relative includes a spouse, brother, sister, brother or sister of the spouse, brother or sister of either parent, any lineal ascendant or descendant, any lineal ascendant or descendant of the spouse, and the spouse of any of the aforementioned persons. This means that gifts from a mother-in-law or brother-in-law are exempt from tax. However, gifts received on occasions like birthdays or anniversaries are charged to tax. Additionally, gifts in the form of immovable property may be subject to tax if the stamp duty value exceeds the consideration value by at least ₹50,000.

In the United States, the situation is more complex. While a brother-in-law can be claimed as a dependent on a tax return if certain conditions are met, the rules for claiming a mother-in-law are more stringent. To claim a brother-in-law as a dependent, he must meet the criteria for a "Qualifying Child" or "Qualifying Relative". A Qualifying Child must be under the age of 19, or under 24 if a full-time student, and the taxpayer must provide more than half of their support. A Qualifying Relative must meet specific gross income requirements, reside with the taxpayer for the entire year, and the taxpayer must provide more than half of their support. It is important to note that a brother-in-law may only qualify as a dependent if the spouse also claims them as a dependent by filing a joint return.

In the context of tax liability, it is important to distinguish between gifts and inheritances. While gifts exchanged between relatives may be tax-free, inheritances may be subject to inheritance or estate taxes, depending on the jurisdiction. It is always advisable to consult a qualified tax professional or legal authority to navigate the complexities of tax laws and ensure compliance with the applicable regulations.

Tax on gifts exceeding 50,000 rupees

In India, gifts are taxed under the "'Income from Other Sources' category in the Income Tax Act. According to the Act, gifts up to ₹50,000 per annum are exempt from tax. However, if the total value of gifts received in a financial year exceeds ₹50,000, the whole amount becomes taxable. The tax rate depends on the income tax slab, which ranges from 5% to 30%.

There are several exemptions to the gift tax regulations. Gifts from close relatives, such as parents, spouses, siblings, and their lineal descendants, are tax-exempt. Additionally, wedding gifts and inheritances are also exempt from gift tax. Gifts received on occasions like birthdays or anniversaries are subject to tax, but gifts received at the time of marriage are exempt.

The stamp duty value is crucial when calculating gift tax on immovable property. The stamp duty value as of the date of the agreement fixing the consideration needs to be considered if there is a time gap between the agreement and registration dates. In such cases, the lower of the two values, either the stamp duty value or the value arrived at by the valuation officer, is used for taxation purposes.

It is important to note that monetary gifts received from abroad are also taxable if the total amount received during the year exceeds ₹50,000. Gifts to minors are also taxable and are clubbed with the income of the parent with the highest income.

Tax on gifts from non-relatives

In India, gifts received from relatives are exempt from tax under Section 56 of the Income Tax Act. According to the IT Act, a relative can be a spouse, brother, sister, brother or sister of the spouse, brother or sister of either parent, any lineal ascendant or descendant, any lineal ascendant or descendant of the spouse, or the spouse of any of the aforementioned persons. Therefore, a brother-in-law falls under the category of a relative, and gifts received from him are tax-free. However, gifts from friends are taxable. Additionally, gifts received on occasions like birthdays or anniversaries are taxable, while gifts received at the time of marriage are exempt from tax. Furthermore, stamp duty on immovable property is taxable if its value exceeds the consideration value by at least ₹50,000.

In the United States, the Internal Revenue Service (IRS) imposes a gift tax on any gifts of property, including cash, with a value exceeding a certain amount. This is known as the annual gift tax exclusion, which was $15,000 for the 2018-2025 period and is scheduled to increase to $19,000 in 2025. Any gifts above this annual exclusion amount are taxable, but they are subtracted from a lifetime exclusion of $13.61 million (as of 2024) before incurring any tax liability. This means that you only owe gift taxes once your lifetime exclusion amount has been exceeded. The donor is generally responsible for paying the gift tax, but under special arrangements, the recipient may agree to pay it instead. It is important to note that gifts between spouses are eligible for the marital deduction and are not subject to gift tax. Additionally, gifts made in contemplation of death, such as inheritance, are exempt from federal inheritance tax, although some states impose their own inheritance tax.

Frequently asked questions