Gifts from Relatives: Is a Gift Deed Mandatory

Apr 09, 2026

Background

Under Indian income-tax law, gifts received from specified relatives are generally exempt from tax, provided the relationship and genuineness of the transaction can be established. However, a recurring practical question is whether executing a formal gift deed is mandatory to claim such exemption—especially when gifts are made through banking channels and supported by other evidence. This issue came into focus in the case of Deb Prasanna Choudhury vs. ADIT (ITAT Kolkata), where the tax authorities questioned the validity of gifts received from relatives in the absence of a registered gift deed, leading to important clarity on documentation requirements and the evidentiary value of surrounding facts.

Case Study

Real-Life Case Study: Deb Prasanna Choudhury vs. ADIT (ITAT Kolkata)

1. Case Profile

  • Deciding Authority: ITAT Kolkata Bench
  • Key Issue: Addition of ₹80 Lakhs as "Unexplained Income" due to lack of a formal Gift Deed.

2.The Facts of the Case

  • The Transaction: Dr. Choudhury, an NRI residing in the UAE, received a gift of ₹ 80,00,000 from his brother-in-law (his sister’s husband).
  • The Channel: The money was transferred directly via a standard banking channel (NRE account).
  • The Conflict: During assessment, the Tax Department (AO) argued that the gift was not valid because:
    • No registered Gift Deed was executed in India.
    • The "Creditworthiness" of the brother-in-law was questioned despite the funds coming from a bank.
    • The AO felt such a large sum without a formal deed was "suspicious."

3. The ITAT’s Detailed Observations

The Tribunal overruled the Tax Department’s addition with the following logic:

  • Statutory Definition of Relative: The ITAT pointed out that Section 56(2)(x) explicitly includes the "spouse of the sister of the individual" in the definition of a relative. Therefore, the gift was inherently exempt from tax.
  • No Legislative Requirement for a Deed: The Tribunal held that Parliament has not mandated a Gift Deed under Section 56 or Section 68 for monetary gifts.


    • "Imposing Gift Tax formalities (from the repealed Gift Tax Act) in today’s regime is legally impermissible."


  • Evidence of Movable Property: For money (movable property), the "delivery" of the fund via a bank account is sufficient proof of the transfer. A registered deed is only mandatory for immovable property like land or buildings.
  • Documentary Sufficiency: The taxpayer had provided:
    1. NRE Bank Statements.
    2. Identity and tax particulars of the donor.
    3. Proof of the family relationship.

    The ITAT ruled this was more than enough to discharge the taxpayer's burden of proof.

Conclusion & Final Ruling

The ITAT deleted the addition of ₹80 Lakhs, ruling that:

  • A Gift Deed is not a statutory requirement for monetary gifts between relatives.
  • If the Identity, Creditworthiness, and Banking Trail are established, the AO cannot add the amount to your income just because of a missing document

Author:
Maria

Prepared On:
09/04/26



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