Same-Sex Couple’s Gold Bracelet Gift Raises Wider Question Over India’s Gift Tax Rules

A gold bracelet gifted between two Bengaluru-based partners has become the centre of a tax dispute that could test how India’s gift-tax provisions apply to same-sex couples.

Software engineers Anurag Kalia and Akhilesh Godi have approached the Karnataka High Court (KHC) over the treatment of a 22-karat gold bracelet that Godi gifted Kalia on their relationship anniversary. The bracelet, which Godi had received from his father as a family heirloom, was valued at Rs 1,15,500.

The issue is not the jewellery itself, but whether the recipient can claim the tax exemption available when a gift comes from a “relative.”

Why The Bracelet Can Become Taxable

Under Section 56(2)(x) of the Income-tax Act, 1961, money or specified property received without consideration can be taxed as “income from other sources” when the prescribed Rs 50,000 threshold is crossed. Gifts received from specified relatives are excluded from this rule.

The definition of relative includes a spouse, along with several other family relationships. A gift between legally recognised spouses can therefore qualify for exemption irrespective of its value.

For Kalia and Godi, however, the difficulty arises because their relationship is not recognised as a marriage under Indian law. As a result, they cannot automatically fall within the “spouse” category for the gift exemption. Kalia was advised that the bracelet would have to be disclosed as taxable income.

The couple has challenged this distinction, arguing that denying the exemption to partners in a long-term same-sex relationship results in unequal tax treatment, according to a report in The Times of India.

What The Court Is Being Asked To Examine

The Karnataka High Court has sought the Centre’s response to the petition. The dispute centres on whether the definition used in the tax provision can be interpreted or altered so that long-term same-sex partners are not excluded from the benefit available to spouses.

The government’s position in similar litigation has been that tax law cannot treat partners as spouses when their relationship is not recognised as marriage under existing marriage laws. A comparable petition is also before the Bombay High Court.

The legal question has practical consequences. Under the present framework, unmarried partners, including same-sex partners, do not receive the same automatic exemption available to spouses merely because they are in a committed relationship.

What Taxpayers Should Keep In Mind

Until the courts or Parliament changes the position, taxpayers should not assume that a high-value gift from a partner will be tax-free. The tax treatment will depend on whether the giver falls within the statutory definition of “relative”, the nature and value of the asset, and whether any other exemption applies.

For couples outside legally recognised marriage, documenting the gift and checking its tax consequences before filing the return can help avoid a later dispute.

FAQs

1. Are gifts between spouses taxable in India?
Gifts received from a spouse are generally exempt from tax because a spouse falls within the definition of “relative” under Section 56(2)(x).

2. Can a gift from an unmarried or same-sex partner be taxable?
Yes. If the partner does not qualify as a “relative” under the tax law and the prescribed threshold is crossed, the gift may become taxable.

3. Why is the Karnataka High Court case significant?
The case could determine whether same-sex partners in long-term relationships should receive the same gift-tax treatment currently available to legally recognised spouses.