Diwali Cash Gifts From Friends And Relatives May Attract Tax: Check Who Is Exempt And How Much Money One Can Receive

Diwali Cash Gifts: Diwali often means cash gifts from family, friends, colleagues, and neighbours. Before you accept the money, it is better to know how the income-tax rules work. Whether you owe tax or not depends on how much you receive and who is giving it to you.

Under the Income-tax Act, 2025 (which corresponds to the earlier Income-tax Act, 1961), gifts from certain relatives stay tax-free no matter how large they are. Gifts from non-relatives, on the other hand, can become taxable once their total value goes past Rs 50,000 in a financial year.

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What Is The Tax-Free Limit For Diwali Cash Gifts?

According to a News18 report, CA Suresh Surana points out that Section 92(2)(m) of the Income-tax Act, 2025 (the section that matches Section 56(2)(x) of the 1961 Act) decides when these gifts get taxed.

Cash received from friends, colleagues, neighbours or anyone who is not a specified relative is usually free of tax if the combined amount stays at or below Rs 50,000 in a year. The moment the total crosses that line, the whole sum becomes taxable under “Income from Other Sources."

For example, if one gets Rs 20,000 from a friend, Rs 15,000 from a colleague and Rs 20,000 from a neighbour, that adds up to Rs 55,000, so the entire Rs 55,000 is treated as taxable income.

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Are Gifts From Relatives Taxable?

Cash gifts coming from the relatives listed in the law are generally exempt, regardless of the amount. This covers gifts from your husband/wife, your brothers and sisters, your spouse’s brothers and sisters, your parents’ siblings, your lineal ascendants and descendants, and the spouses of all these people.

However, the tax exemption does not eliminate the limits that apply to receiving large amounts in physical cash.

Is There A Limit On Cash Gifts?

Section 186 of the Income-tax Act, 2025 (the counterpart of Section 269ST of the 1961 Act) stops one from taking Rs 2 lakh or more in cash under certain conditions. One cannot receive that much from one person in a single day, in one transaction, or in connection with one event or occasion.