Definition of Relative for Indian Income Tax

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Individuals can receive certain gifts from relatives without taxation.
Individuals can receive certain gifts from relatives without taxation. (Image: indian man walking arm in arm with his family image by Gina Smith from Fotolia.com)

In India, certain gifts received from relatives are considered tax-exempt. A clear and concise understanding of "relative" is pertinent to compliance of income tax laws in India. According to Indian Info, "under Indian law, taxes are not levied in respect to gifts presented by blood and lineal relatives on specific occasions up to the maximum amount of Rs. 10,00,000 per year."

Definition of Relative

As stipulated in Section 2(41) of the Indian Tax Act of 1958, “relative, in relation to an individual, is defined as the husband, wife, brother or sister or any lineal ascendant or descendant of that individual, that is, children and grandparents." According to CA Club India, daughter-in-law and sister-in-law are classified as relatives; however, their relative status is only applicable as the legatee or under extenuating provisions. The son-in-law relationship is not absorbed under the legislative definition of relative.

Gift Tax and Relative Exemption

Gifts received from an individual or Hindu United Family (HUF) as defined by the Indian Tax Act are nontaxable up to Rs. 50,000 per article or Rs. 10,000,000 per year. Gifts from relatives on occasions such as marriage and familial death are tax exempt. This includes gifts from parents and grandparents, daughter-in-law from her parents-in-law, and inheritances. Simple Tax India asserts, "reasonable gifts to minor children for educational purposes qualify as nontaxable. A nonresident Indian may confer nontaxable monetary gifts to parents in India from their NRE (Nonresident External) account."

Relatives and Charitable Trusts

Indian laws contain provisions for providing certain benefits to charitable and religious trusts and extended family members as an alternative to individual relatives or Hindu United Family. These provisions allow an individual to elect a specific trustee or person as beneficiary to negate misuse of assets and property.

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