Wedding Gift Tax: Parents Can Be Taxed on Cash Gifts During Child’s Marriage
Gifts received by parents at their children’s weddings are taxable under Indian law, confirms a recent High Court ruling. Understand the tax implications now.
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The Punjab & Haryana High Court has ruled that cash gifts received by parents at their children’s weddings do not qualify for tax exemption under Section 56(2)(vi) of the Income Tax Act.
Last week, a bench led by Justice R. K. Sharma dismissed the petition filed by Chandigarh resident Rajinder Mohan Lal, who had received Rs 21 lakh as "shagun" from friends and well‑wishers on the occasion of his daughter’s marriage. The Income Tax Department had added the amount to his taxable income after he failed to declare it in his 2007–08 return.
Lal argued that in Indian customs parents routinely receive monetary gifts during their children’s weddings and should be covered by the marriage‑gift exemption. The court disagreed, stating the statutory language is clear: the exemption applies only to gifts received "on the occasion of the marriage of the individual"—that is, the bride or groom, not their relatives.
"If the legislature intended to include parents or other relatives, it would have expressly done so," the judgment noted.
Under Section 56(2)(vi), monetary gifts exceeding Rs 50,000 are taxable unless received from specified relatives, on an individual’s own marriage, or under inheritance or will. The court clarified that the phrase "own marriage" restricts the exemption to the person whose wedding is solemnized.
Kunal Savani, partner at Cyril Amarchand Mangaldas, said the decision underscores a narrow interpretation of "individual" in the provision. "Gifts to parents, siblings or other parties linked to the celebration remain taxable," he noted.
Tax professionals warn that families should review shagun practices ahead of ceremonies. Experts advise:
* Confirm whether donors qualify as "close relatives" under the Income Tax Act.
* Advise parents and relatives to declare large gifts to avoid assessments and penalties.
* Track any income generated from gifted assets, as returns on such assets (rent, interest, capital gains) are individually taxable.
The ruling is likely to affect wedding gift customs nationwide, prompting both donors and recipients to exercise caution when handling large cash gifts during family celebrations.
