Cash gifts from relatives are generally tax-free under the Income Tax Act. But a recent case discussed by tax advisory platform said in a social media thread shows how exemption can fail without proper documentation. In this matter, Rs 10.43 lakh received as cash gifts on a marriage anniversary was ultimately taxed after the taxpayer failed to provide basic details of the donors.
According to the thread shared by a expert, the taxpayer had celebrated his 10th marriage anniversary and received multiple cash gifts from family members and relatives. Individual amounts ranged from Rs 2,100 to Rs 11,000, and the total cash deposited in his bank account came to Rs 10,43,998.
Since gifts from specified relatives are exempt under income tax law, the taxpayer claimed the amount was not taxable and described them as customary gifts received during a social function.
However, the issue began when the tax department noticed the large cash deposits in his bank account.
Why the case came under scrutiny
The assessing officer sought clarification on:
- The exact source of the cash deposits
- Names of the persons who gave the gifts
- Relationship with each donor
- Amount received from each individual
Large cash transactions often invite closer examination, especially when supported only by general explanations.
The critical gap
While the taxpayer maintained that the money came from relatives during his anniversary celebration, he was unable to provide – a list of donors, documentary proof of relationship, break-up of amount received from each person, and PAN or identity details of the contributors.
This lack of documentation became the turning point.
What the law says
Gifts from relatives are exempt from tax. But exemption is not automatic. It applies only when the donor is identifiable, the relationship qualifies under the definition of “relative” in the Income Tax Act, and the transaction can be verified if questioned.
Without supporting details, the tax officer cannot conclusively allow the exemption.
What happened next
The tax officer treated the entire ₹10,43,998 as unexplained money and added it to the taxpayer’s income. On appeal, the Income Tax Appellate Tribunal (ITAT) upheld the decision, noting that basic donor information was missing and therefore the exemption claim could not be accepted.
The amount remained taxable.
What taxpayers should learn from this
If you receive cash gifts during weddings, anniversaries or other social functions, maintain proper records. At the very least, keep:
- Name of the donor
- Relationship
- Amount received
- Basic supporting proof
The case, highlighted by expert said on social media thread, underlines a simple but important point — eligibility alone is not enough. In tax matters, documentation is crucial.
It is also important to note that this was an ITAT ruling and such decisions can be challenged in higher courts. Taxpayers should consult a tax professional for advice based on their specific situation.
