Wedding gifts & taxation: Get donor letters for high-value non-cash gifts

Substantial cash gifts should be received via cheques or drafts

In a recent case—Manubhai Dahyabhai Bhoi v. ITO—the assessing officer (AO) disputed cash deposits of ₹4.31 lakh, which the taxpayer claimed as wedding gifts. The AO argued that the deposits were made nearly a month before the marriage and hence could not be treated as gifts. The taxpayer, however, produced a guest list, marriage documents, and other records.

 

The dispute centred on the timing of the gifts. “The gifts were received by the taxpayer around a month prior to the wedding. The department regarded the timing of the gifts as unusual, since wedding gifts are generally received around the wedding date itself,” says Rajarshi Dasgupta, executive director – tax, AQUILAW.

 

The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) held that timing alone does not render gifts non-genuine. Since the taxpayer provided sufficient evidence (a complete list of the names of people from whom gifts were received), the ITAT deleted the addition to income and ruled that genuine wedding gifts cannot be treated as unexplained income.

 

Legal provisions

 

Under Section 56(2)(x) of the Income Tax Act, gifts received on the occasion of marriage, whether in cash or kind, are fully exempt from taxation.

 

“Penalties under Section 269ST apply if ₹2 lakh or more is received in cash from one person,” says Aditya Bhattacharya, partner, King Stubb & Kasiva, Advocates and Attorneys.

 

Section 56(2)(x) of the Act uses the expression “on the occasion of the marriage”. “Courts have held this expression as not being equivalent to ‘on the same date’. Thus, gifts before or after marriage continue not to be held as income as long as it is proved to be ‘on the occasion of the marriage’,” says Itesh Dodhi, director, Nangia & Co. LLP.

 

Maintain records

 

To establish genuineness, taxpayers should maintain a detailed guest list with amounts received from each person. “If the value of a gift is substantial, request cheques or drafts in the name of the bride or groom. For non-cash gifts of significant value, a letter from the donor can serve as useful evidence in case of an inquiry by the revenue authorities,” says Dodhi.

 

Common pitfalls

 

Failure to disclose exempt income is the most frequent mistake, which can trigger scrutiny. Though not taxable, such income must be reported and supported with proper records.

 

“With most transactions—such as cash deposits and property purchases—being monitored by the Income Tax Department, and many now reflected in the Annual Information Statement (AIS), non-disclosure and non-maintenance of adequate documentation leading to a mismatch in the amount of expenditure vs income of the individual may trigger scrutiny notices,” says Dasgupta.

 

Section 56(2)(x) refers to gifts received by the “individual”, meaning they should go directly to the bride or groom, not their parents. “Direct receipt helps avoid litigation,” says Dodhi.

 

Best practices

 

Experts advise disclosing exempt gifts in returns, maintaining documentary evidence such as invitations and donor lists, and using banking channels for large transfers. “Common errors—such as not disclosing gifts, ignoring cash-limit rules, or lacking documentation—can trigger disputes, making proper disclosure and documentation the best safeguard against litigation,” says Bhattacharya.

 

The law does not require gifts to be received strictly on the wedding day, but they must be closely linked to the occasion. “Gifts received within a reasonable proximity to the wedding date are generally accepted as genuine, while those received long after may be harder to justify as wedding gifts,” says Dodhi.

                                  Maintain documentary proof of wedding 

·       Marriage invitation

 

·       Marriage certificate

 

·       Photographs of the wedding

 

·       For multiple cash gifts of relatively smaller values, a list of the donors should be maintained

 

·       Prefer banking channel for large transfers

 

·       Get gift deed executed between donor and donee for substantial gifts