As the Income Tax Return (ITR) filing season gains momentum, many taxpayers are confused about one important question—what happens if you receive money or gifts from your parents, spouse, brother, sister, or other close relatives? Should such transactions be reported in your ITR, and can failing to mention them result in a notice from the Income Tax Department?

The confusion has increased this year after changes were introduced in the new ITR forms for Assessment Year 2026-27. However, understanding the tax rules related to gifts from relatives can help taxpayers avoid unnecessary worries.

Under the Income Tax Act, gifts received from specified relatives are not treated as taxable income, irrespective of the amount involved.

Whether parents transfer money for purchasing a house, siblings provide financial support, or a spouse gifts a substantial sum, such receipts are generally exempt from tax and do not attract any gift tax liability.

Unlike gifts received from non-relatives, there is no monetary ceiling on tax-free gifts received from eligible family members.

The Income Tax Department recognizes certain family members as "specified relatives." Gifts received from these individuals are fully exempt from taxation.

These relatives include:

• Husband or wife

• Father and mother

• Grandparents

• Children and grandchildren

• Brothers and sisters

• Spouse's brothers and sisters

• Brothers and sisters of parents

Any financial gift received from these relatives is generally not considered taxable income.

In earlier years, taxpayers had the option of reporting certain exempt incomes under the "Other Exempt Income" category while filing returns.

However, the revised ITR forms for AY 2026-27 do not provide a separate reporting field specifically for gifts received from relatives. This has led many taxpayers to believe that the rules may have changed or that disclosure has become mandatory.

In reality, the absence of a separate reporting column does not mean that such gifts have become taxable.

At present, there is no specific requirement to disclose tax-free gifts received from specified relatives in a dedicated section of the ITR form.

The primary reason is that these gifts are not exempt because of a special deduction or concession. Instead, they are excluded from the definition of taxable income itself under the law.

Therefore, most taxpayers are not required to separately report such gifts in their return solely because they were received from eligible relatives.

Even though the amount may not be taxable, maintaining proper records is highly advisable.

If the Income Tax Department seeks clarification regarding a significant bank transaction or a large asset purchase, taxpayers should be able to establish the source of funds.

Useful supporting documents may include:

• Gift deed

• Proof of relationship

• Identity documents of donor and recipient

• Bank transfer records

• Transaction receipts

Proper documentation can help resolve future queries quickly and smoothly.

Extra caution is recommended when the gifted amount is substantial and is later used for major investments such as:

• Purchasing a house

• Buying land

• Acquiring high-value assets

• Making large financial investments

In such cases, maintaining a clear trail of documents becomes even more important. Tax experts often suggest preserving records and, where appropriate, reflecting the source of funds in financial statements to avoid future disputes.

There is no need to panic if you have received money from your parents, spouse, siblings, or other specified relatives. Such gifts are generally fully tax-free and do not automatically require separate reporting in the ITR.

However, keeping proper documentary evidence is essential, especially for high-value transactions. If questions arise in the future, strong records will help prove the legitimacy and source of the funds without any difficulty.

For most taxpayers, the best approach is simple: enjoy the tax exemption, but never ignore documentation.