Income tax · Individuals and salaried
How are family pension, gifts from relatives and agricultural income taxed?
Short answer
Family pension is taxed as income from other sources, after a deduction of one-third, up to ₹25,000 in the new regime or ₹15,000 in the old. Gifts from relatives, and gifts on marriage or by inheritance, are fully exempt; other gifts are taxable if they exceed ₹50,000 in the year. Agricultural income is exempt, but if it exceeds ₹5,000 and you have other income above the basic exemption, it is used to work out the tax rate on your other income.
Family pension
Pension paid to the family of a deceased employee is taxed as income from other sources, after a deduction of one-third of the pension, up to ₹25,000 (new regime) or ₹15,000 (old regime). Family pension received by the family of a member of the armed forces killed in operations is fully exempt. Pension that the employee receives personally is salary, with the standard deduction instead.
Gifts
| Gift | Taxable? |
|---|---|
| From a relative: spouse, brother or sister, their spouses, parents, grandparents, children, grandchildren, the spouse's family in the same degree, and so on | No, any amount |
| On the occasion of your marriage, from anyone | No |
| By will or inheritance | No |
| From a local authority, a registered charitable trust or similar | No |
| From anyone else, in cash or kind | Yes, the whole amount, if the total of such gifts exceeds ₹50,000 in the year |
| Property received for less than its stamp duty value, from a non-relative | The difference is taxable if it exceeds ₹50,000 and 10% of the price |
Cash gifts of ₹2 lakh or more from one person in a day are not allowed in cash (section 269ST). Keep a gift deed or letter and the bank trail for large gifts, even from relatives. Income earned on money gifted to a spouse or minor child may be clubbed with the giver's income.
Agricultural income
Income from land in India used for agriculture (crop sale by the cultivator, rent from agricultural land, farm-house income meeting the conditions) is exempt: under section 10(1) of the 1961 Act, and under section 11 read with the Schedules of exempt income in the Income-tax Act, 2025. But under the partial integration rule, if agricultural income exceeds ₹5,000 and your other income exceeds the basic exemption limit:
- tax is computed on other income plus agricultural income;
- tax is computed on agricultural income plus the basic exemption limit;
- the tax payable is (1) minus (2).
The effect is that agricultural income pushes your other income into a higher slab. Report it in your return (ITR-2 or ITR-3 if it exceeds ₹5,000). Sale of agricultural land is a separate matter: rural agricultural land is not a capital asset, but urban agricultural land is.
Legal basis
- Sections 56(2)(x) and 57(iia), Income-tax Act, 1961 (gifts and family pension)
- Sections 2(1A) and 10(1), Income-tax Act, 1961 (agricultural income); Finance Act (partial integration rule)
- Section 11 and Schedules II to VI, Income-tax Act, 2025 (exempt income, including agricultural income), and the matching provisions on gifts and family pension, for tax year 2026-27 onwards
Official sources
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