Rs 10 lakh Cash Gift To Sibling Draws A Tax Notice; Know What Happened Next

A recent case has thrown light on how the Income Tax Department treats large sums exchanged within families. A salaried man who received Rs 10 lakh from his two sisters as a gift found himself in trouble when a notice from the tax department arrived soon after, according to a recent report by the Times of India. What seemed like a simple gesture of love and support ended up becoming a lesson in how crucial documentation can be.

How A Gift Became A Dispute

The man had deposited Rs 10 lakh, money gifted to him by his sisters, in his bank account. The tax authorities soon flagged the transaction, treating it as unexplained cash under Section 68 of the Income Tax Act. He was asked to show where the money came from and to prove it was not undeclared income.

He explained that both his sisters had transferred the amount out of affection. Under Section 56(2)(vii) of the Act, gifts received from “relatives” are exempt from tax, and siblings are clearly included in that definition. To support his statement, he provided written confirmations, bank statements, and affidavits from his sisters explaining the transaction.

Despite that, the assessing officer raised doubts about whether the sisters had sufficient means to make the gift. The dispute then went to the Commissioner of Income Tax (Appeals). After examining the evidence, the appellate authority ruled in the taxpayer’s favour, stating that since the donors’ identity, relationship, and financial capacity were proven, the gift could not be treated as taxable income.

What This Case Teaches

While gifts between close relatives are tax-free, this case highlights that the recipient must still be ready to prove the genuineness of the transfer. Large deposits, especially in cash, often invite questions. It’s not enough to say the money came from a family member; you must be able to demonstrate that the person had the means and intention to give it.

If you receive a sizeable gift from a relative, document everything. Keep a short-written note or declaration explaining the gift, retain a copy of the donor’s bank statement, and ensure the transaction happens through a bank rather than in cash. A few simple papers can prevent unnecessary stress later.

The man in this case managed to clear his name because he had the right proof ready. His story serves as a quiet reminder that while affection cannot be taxed, it still needs to be shown on paper. In the eyes of the law, even love between siblings benefits from a well-kept file.