Same-Sex Couple Seeks Spousal Gift Tax Relief; Why I-T Department Opposes Plea

A dispute over gifts has raised a wider question before the Bombay High Court (BHC): can a same-sex couple claim a tax benefit that the law gives to spouses?

Petitioners Payio Ashiho and Vivek Divan have challenged Section 56(2)(x) of the Income Tax Act, 1961. They argue that excluding same-sex couples from the meaning of “spouse” results in unequal financial treatment, even when the partners are in a long-term relationship.

The Income Tax Department (ITD) has opposed the petition and sought its dismissal. Its position is that tax law cannot recognise a relationship as a marriage or treat the partners as spouses when the union is not recognised under India’s marriage laws.

Why Gifts Between Partners Can Be Taxed

Under Section 56(2)(x), money or property received without consideration may be taxed as income from other sources when its value crosses Rs 50,000. The law provides exemptions for gifts received from specified relatives, according to a recent report by The Times of India.

A spouse is included within this list. Gifts exchanged between legally recognised spouses, therefore, do not become taxable merely because their value exceeds the threshold.

The difficulty for same-sex couples is that their relationships are not currently recognised as marriages under Indian law. A gift from one partner to another may consequently not qualify for the spouse exemption and could become taxable, depending on its value and nature.

The petitioners have described this as indirectly discriminatory. They want the court either to hold the provision unconstitutional to the extent that it excludes them or to interpret “spouse” in a way that includes same-sex couples in stable relationships.

Why The Tax Department Has Objected

The tax department maintains that the petition is attempting to secure marital recognition through a taxation provision. According to its affidavit, “spouse” under tax law cannot be given a meaning that conflicts with the treatment of marriage under other laws.

It has also raised a procedural objection. The department said the petitioners had not challenged a specific assessment order, tax demand or action by the authorities. It argued that there was no concrete tax decision for the court to examine through a writ petition.

The BHC had earlier declined to grant interim protection to the couple. The matter was later adjourned several times at the revenue’s request.

What Happens Next

The case is scheduled to be heard on July 30, 2026. The court has indicated that no further adjournment will be granted to the tax department.

The outcome may extend beyond this dispute. It could determine whether a tax provision can extend financial benefits to same-sex partners without a separate law recognising their unions as marriages. Until the court decides the issue, same-sex couples cannot automatically assume that gifts exchanged between them will receive the tax treatment available to legally recognised spouses.

FAQs

1. Are gifts between same-sex partners exempt from tax?

Not automatically. Since same-sex partners are not currently treated as spouses under Indian marriage laws, gifts above Rs 50,000 may become taxable.

2. What are the petitioners asking the Bombay High Court to decide?

They want the court to interpret “spouse” under Section 56(2)(x) to include same-sex partners or hold the exclusion unconstitutional.

3. Why has the Income Tax Department opposed the plea?

The department argues that tax law cannot grant spousal status when the relationship is not legally recognised as a marriage under Indian law.