Direct Taxation

December 2025

Introduction

by Anjali Darak

Manager - Direct Tax

Gifts are often seen as a symbol of love, respect and goodwill — exchanged during festivals, weddings, or as gestures of appreciation. However, when it comes to taxation, not every gift is “tax-free.” Many taxpayers are unaware that certain gifts, depending on their value, source and nature, can attract tax under the Income Tax Act, 1961. The law treats some gifts as income in the hands of the recipient, making it essential to understand the provisions that govern them.

This article breaks down the gift tax rules in India, explaining when a gift becomes taxable, which exemptions apply and how individuals can avoid unnecessary tax liabilities through proper planning and compliance.

Coming to this month’s, Taxation Times, here’s what we have:

An article on “Gift Tax Rules: How to Avoid Unwanted Liabilities as per the Income Tax Act”.
Case Laws from various courts & jurisdictions
Tax Compliance Calendar –December 2025
Circulars & Notifications – November 2025
Tax News from around the world

We hope that you find this month’s edition of the Taxation Times useful. In case you have any feedback or need us to include any information to make this issue more informative, please feel free to write to us at info@uja.in.

Happy Reading!

Best Regards,
UJA Tax Team

Gift Tax Rules: How to Avoid Unwanted Liabilities as per the Income Tax Act

Gifting is a common way to express affection, gratitude or generosity — be it during festivals, weddings or personal milestones. However, what many taxpayers overlook is that gifts can sometimes attract tax implications under the Income Tax Act, 1961. Understanding how gifts are taxed and how to structure them correctly can help you avoid unwanted liabilities.

1. What Constitutes a Gift Under the Income Tax Act?

Under Section 56(2)(x) of the Income Tax Act, any sum of money, movable property or immovable property received without consideration (or for inadequate consideration) is treated as a “gift.” The recipient of the gift (i.e., the person receiving it) is liable to pay tax on its value — unless the gift qualifies for an exemption.

2. The ₹50,000 Threshold Rule

If the aggregate value of gifts (in the form of money, movable property, or immovable property) received by an individual during a financial year exceeds ₹50,000, the entire amount becomes taxable under “Income from Other Sources.”
Example:
If you receive ₹40,000 from a friend in June and ₹20,000 from another friend in December, the total of ₹60,000 exceeds ₹50,000. Therefore, the entire ₹60,000 will be taxable.

3. Gifts That Are Fully Exempt

Fortunately, not all gifts are taxable. The law provides several specific exemptions, mainly for gifts received from close relatives or on special occasions.

a) Gifts from Relatives

Gifts from certain relatives are fully exempt, irrespective of the amount.
As per the Act, “relatives” include:

Spouse
Brother or sister of the individual
Brother or sister of the spouse
Brother or sister of either parent

Any lineal ascendant or descendant of the individual or spouse (e.g., parents, grandparents, children, grandchildren)
Spouse of any of the above persons

Note: Gifts from cousins, friends or distant relatives do not qualify for exemption unless covered in the list above.

b) Gifts on Specific Occasions

Gifts received:

On the occasion of marriage of the individual (fully exempt)
Under a will or inheritance
In contemplation of death of the payer
From any local authority or charitable institution registered under Section 12A/12AB or Section 10(23C)

These are all exempt from tax, regardless of value.

4. Tax Treatment of Movable and Immovable Property Gifts

The Income Tax Act distinguishes between monetary gifts and property gifts:

Type of Gift	When Taxable	Basis of Valuation
Money (Cash/Cheque/Transfer)	If the total value exceeds ₹50,000	Aggregate amount
Immovable Property (e.g., land, house)	If received without consideration and stamp duty value > ₹50,000	Stamp duty value
Immovable Property (for inadequate consideration)	If the difference between stamp duty value and consideration > ₹50,000	Difference amount
Movable Property (e.g., jewelry, shares, paintings)	If received without consideration and FMV > ₹50,000	Fair market value (FMV)

5. Clubbing Provisions to Watch Out For

If an individual transfers money or assets to a spouse or minor child as a gift, the income generated from those assets (like interest, rent, or dividends) may be clubbed with the donor’s income under Sections 60–64 of the Income Tax Act.
This rule prevents taxpayers from shifting income to lower-taxed family members to save tax.

6. How to Avoid Gift Tax Liabilities – Smart Planning Tips

Keep documentation: Always maintain proper gift deeds or bank transfer records to establish the genuineness of the transaction.
Prefer gifts from relatives: Gifts from defined relatives are completely exempt — a safe and tax-free way to share wealth.
Avoid frequent cash gifts: Large or repeated cash gifts can attract scrutiny under both the Income Tax Act and anti-money laundering provisions.
Consider timing: Plan gifts across financial years to stay within the ₹50,000 threshold, where possible.
Use occasion-based exemptions: Gifts on marriage or inheritance are excellent opportunities for tax-free transfers.

7. Key Takeaway

While gifting is a noble gesture, it’s essential to understand that the Income Tax Department treats certain gifts as income. By knowing the rules under Section 56(2)(x) and structuring your transactions wisely, you can avoid unwanted tax liabilities and ensure compliance.
Always consult a tax professional before executing large or complex gift transactions. A little planning can go a long way in keeping your gifts truly tax-free.

Case Laws

November 2025

[2025] 180 taxmann.com 207 (SIKKIM) HIGH COURT OF SIKKIM Zydus Healthcare Ltd v. Assistant Commissioner of Income Tax
NOVEMBER 5, 2025

Section 246A, read with section 148A, of the Income-tax Act, 1961

Fact I :

The Assessing Officer received information that income had escaped assessment within the meaning of section 147. Thus, it issued a notice under section 148A(b) against the assessee on three issues, namely, (a) under charge of income under section 115JC in relation to donation claimed under section 80GC, (b) under determination of Book Profit and escapement of income in respect of Excise Duty refund of ₹ 22.99 crores, (c) under charge of income of ₹ 22.99 crores by claiming Excise Duty refund as Capital Receipt.
The assessee responded vide communication, after which the Order under section 148A(d) was passed by the Assessing Officer discussing and summarizing the findings on the above issues.
On writ Petition, the revenue contended that the assessee without exhausting the alternative remedies, filed the instant Writ Petition, therefore, it is not maintainable in the eyes of law.

Held I:

At the outset, the submission of the Writ Petitioner that the IT Act makes no provision for appeals against an order under section 148A(d) as a reading of section 246A(1)(b) makes such a room is not agreeable. That having been said, it is now a settled position of law that the power to issue prerogative writs under Article 226 of the Constitution of India is plenary and discretionary in nature. [Para 3]
In light of the settled position of law and the questions raised before this Court by the Writ Petitioner, it is viewed that nothing prevents this Court from exercising its discretion and plenary powers provided under Article 226 of the Constitution of India to consider the matter at hand. [Para 4]
On the anvil of the foregoing discussions, the preliminary objection stands rejected and the Petition disposed of.

In Favour of: The assessee

[2025] 180 taxmann.com 239 (Delhi) HIGH COURT OF DELHI Vedanta Ltd. v. Assistant Commissioner of Income-tax Delhi.
NOVEMBER 3, 2025

Section 69C, read with sections 148 and 148A, of the Income-tax Act, 1961 - Income escaping assessment - Unexplained expenditure (Bogus ITC) - Assessment year 2019-20

Facts II :

The assessee entered into a sale transaction of copper concentrate when its copper plant was closed down due to environmental concerns. The said transaction was entered into through four agreements with one ‘X’ for the sale and repurchase of copper. Thereafter, when the copper plant was directed to be restored for operation, the assessee repurchased the copper concentrate.
The Assessing Officer received intelligence from the Directorate General of GST Intelligence, in respect of wrongful availment of Input tax credit without actual receipt of goods at the declared place of business of the assessee.
According to the revenue, bogus ITC was amounting to more than Rs. 424 crore, which was availed of. On the basis of the investigation report of the DGGI, the Assessing Officer issued the notice under section 148A(1).
Thereafter, order under section 148A(3) was passed.

Held II:

The present case is governed by the provisions of section 148A, as amended and brought into effect from 1-9-2024. [Para 13]
Notably, the impugned order was passed prior to the GST order and thus, obviously, the said order of the GST department, could not have been taken into consideration by the concerned officer. [Para 14]
Moreover, the closing of the proceedings by the GST Department would have an impact and bearing on the section 148A proceedings and, therefore, the impugned order deserves to be set aside, and the matter deserves to be remanded for reconsideration, in view of the GST order dated 11-7-2025. [Para 15]
Accordingly, the impugned order is set aside. The matter is remanded for being considered afresh, after bearing in mind the GST order dated 11-7-2025. [Para 16]
Insofar as the legality and validity of the impugned notice is concerned, the submission made on behalf of the assessee, that there has to be independent reasoning given by the Income Tax Department and hence the said notice is itself unsustainable, is left open at this stage, for being canvassed at a later stage, if the need so arises. [Para 17]

Conclusion: Matter remanded

Circulars and Notifications November 2025

Circulars

EXTENSION OF TIMELINE FOR FILING OF VARIOUS REPORTS OF AUDIT AND INCOME TAX RETURNS (ITRs) FOR ASSESSMENT YEAR 2025-26

CIRCULAR NO. 15/2025 [F. NO. 225/131/2025/ITA-II], DATED 29-10-2025

The Central Board of Direct Taxes (CBDT), in exercise of its powers under Section 119 of the Income-tax Act, 1961 (the Act), hereby extends the due date for furnishing Income Tax Return (ITR) for the Previous Year 2024-25 (Assessment Year 2025-26) for the assessees referred in clause (a) of Explanation 2 to sub-section (1) of section 139 of the Act, from 31st October, 2025 to 10th December, 2025. Consequently, the specified date for furnishing of the report of audit under the provisions of the Act for the Previous Year 2024-25 (Assessment Year 2025-26) shall stand extended to 10th November, 2025 in terms of clause (ii) of Explanation to section 44AB of the Income-tax Act, 1961.

Notifications

I.CBDT notifies Agreement and the Protocol between India and Belgium for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to taxes on Income

NOTIFICATION NO. 160/2025 DATED: 10TH NOVEMBER, 2025

The Ministry of Finance (Department of Revenue) has issued Notification No. 160/2025 dated November 10, 2025, announcing the enforcement of the Protocol amending the Agreement and the Protocol between the Government of the Republic of India and the Government of the Kingdom of Belgium for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.

The Amending Protocol, which was signed at New Delhi on March 9, 2017, officially entered into force on June 26, 2025, following the completion of all necessary legal requirements and procedures by both Governments.

The updated Protocol strengthens bilateral cooperation between India and Belgium by:

Enhancing exchange of information provisions, allowing broader sharing of tax-related data, including banking and financial information.
Introducing assistance in the collection of taxes to improve cross-border enforcement; and
Updating definitions and scope, including recognition of criminal tax matters and clarification of the competent authorities in both countries.

This development marks another important step in India’s commitment to promote transparency and curb international tax evasion through enhanced collaboration with its treaty partners.

All provisions of the Amending Protocol shall be given effect throughout the Union of India.

Refer attached file for the complete notification.

II. CBDT notifies tolerance range for ALP determination

NOTIFICATION NO.157/2025 DATED 6^TH NOVEMBER, 2025

S.O. 5053(E).— In exercise of the powers conferred by the third proviso to sub-section (2) of section 92C of the Income-tax Act, 1961 (43 of 1961)(hereafter referred to as the said Act) read with the proviso to sub-rule (7) of rule 10CA of the Income-tax Rules, 1962, the Central Government hereby notifies that where the variation between the arm’s length price determined under section 92C of the said Act and the price at which the international transaction or specified domestic transaction has actually been undertaken does not exceed, (i) one per cent. of the latter in respect of wholesale trading; and (ii) three per cent. of the latter in all other cases — the price at which the international transaction or specified domestic transaction has actually been undertaken shall be deemed to be the arm’s length price for the assessment year 2025-2026. Explanation – For the purposes of this notification, “wholesale trading” means an international transaction or specified domestic transaction of trading in goods, which fulfils the following conditions, namely:- a. purchase cost of finished goods is eighty per cent. or more of the total cost pertaining to such trading activities; and b. the average monthly closing inventory of such goods is ten per cent. or less of sales pertaining to such trading activities. [No.157/2025/F. No. 500/1/2014-APA-II] KARTHIK CHEBOLI, Deputy Commissioner of Income Tax (OSD)(APA-I) FT&TR -I, CBDT Explanatory Memorandum. The notification provides for a tolerance range of one per cent. for wholesale trading and three per cent. in all other cases for the assessment year 2025-2026. It is certified that none will be adversely affected by the retrospective effect being given to the notification.

Tax Calendar December 2025

07th December 2025

TDS/TCS Deposit:
Due date for the deposit of Tax deducted/collected for the month of November 2025. However, all sum deducted/collected by an office of the government shall be paid to the credit of the Central Government on the same day where tax is paid without production of an Income tax Challan.

10th December 2025

All income tax returns for the assessee (not having any international or specified domestic transaction) are

(a) corporate assessee or
(b) non-corporate assessee (whose books of account are required to be audited) or
(c) partner of a firm whose accounts are required to be audited) or the spouse of such partner if the provisions of section 5A apply to such spouse.

14th December 2025

Due date for issue of TDS Certificate for tax deducted under section 194S/194-IA/194-IB/194M in the month of August 2025.

15th December 2025

Advance-Tax Instalment due date: Third instalment of advance tax for the assessment year 2026-27.
Form 16A: Quarterly TDS certificate (in respect of tax deducted for payments other than salary) for the quarter ending September 30, 2025.

30th December 2025

Form	Description
Form 26QB	Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194-IA in the month of November, 2025
Form 26QC	Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194-IB in the month of November, 2025
Form 26QD	Due date for furnishing of challan cum statement in respect of tax deducted under section 194M in the month of November, 2025
Form 26QE	Due date for furnishing of challan cum statement in respect of tax deducted under section 194S in the month of November, 2025

31st December 2025

Form 3CEAD: Report by a parent entity or an alternate reporting entity or any other constituent entity, resident in India, for the purposes of sub-section (2) or sub-section (4) of section 286 of the Income-tax Act, 1961 (assuming reporting accounting year is January 1, 2024 to December 31, 2024).
All income tax returns: Furnishing of belated or revised return of income for Assessment Year 2025-26.

Tax News from Around the World

Oman is introducing its first-ever personal income tax: a 5% levy on high-income individuals (earning above OMR 42,000) from 1 January 2028. About 99% of the population will be unaffected.

Even “tax-free” jurisdictions are pivoting towards personal income tax to diversify revenue beyond oil. Shows a global shift in how states think about taxation.

France has released its draft 2026 Finance Bill, which among other things includes changes impacting corporations and potentially personal income tax / allowances.

Changes in major economies tend to ripple out—either via treaties, tax competition or global policy norms.

China is expanding its crackdown on overseas income for its citizens—not just the ultra-rich but increasingly those with lesser wealth. This is part of an effort to tighten tax collection globally for residents.

Tax residency and global income disclosures are increasingly under focus. If you have cross-border income, watching rules in major economies is important.