Is every gift taxable under section 56?

No. Statutory thresholds and exemptions apply, including certain gifts from relatives, on marriage and through inheritance.

Section 56 of Income-tax Act, 1961: Income from Other Sources

Q: Is bank interest income from other sources?

Generally yes where it is not taxable as business income, subject to applicable provisions.

Updated: 25 October 2026 | Indian income-tax law

Section 56 is the residual charging provision for income that is taxable but does not fall under salaries, house property, business or profession, or capital gains. It also specifically covers dividends, certain gifts, property received for inadequate consideration, interest on compensation and other receipts.

Legislative context: This article explains section 56 of the Income-tax Act, 1961, including subsequent amendments. The Income-tax Act, 2025 applies from 1 April 2026 subject to its commencement and transitional provisions; use the legislation governing the relevant tax year. Always consult the official text for the applicable year.

1. Meaning and scope of section 56(1)

Income not exempt and not chargeable under another specified head is taxed as income from other sources. The provision is residual: the correct head of income must be determined before applying it. Section 14 identifies the heads of income.

2. Incomes expressly covered by section 56(2)

Dividends: generally taxable in shareholders' hands, subject to applicable special provisions.
Interest on securities: where it is not business income; other interest may also be covered under section 56(1).
Hire of machinery, plant or furniture: where it is not business income, including inseparable letting with buildings.
Specified receipts under section 2(24): certain employee contributions, key-person insurance receipts and other defined amounts, depending on their proper tax head.
Interest on compensation or enhanced compensation: section 56(2)(viii), read with section 145B and applicable deduction under section 57.
Forfeited advance: section 56(2)(ix) covers a sum forfeited during negotiations for transfer of a capital asset where the transfer does not take place.
Gifts and undervalued property: section 56(2)(x), subject to valuation thresholds and statutory exclusions.
Employment-related termination or modification payments: section 56(2)(xi), with classification and other applicable provisions to be checked.
Other specified receipts: the complete amended statutory text contains additional clauses, including provisions relating to specified insurance receipts and business-trust distributions.

3. Section 56(2)(x): gifts and property without adequate consideration

Subject to exceptions, where a person receives money without consideration and the aggregate exceeds Rs. 50,000 in the relevant year, the entire amount may be taxable. Specified immovable property received without consideration is generally tested against a Rs. 50,000 stamp-duty-value threshold. For immovable property purchased below stamp duty value, the difference is taxable when it exceeds the higher of Rs. 50,000 and 10% of consideration, subject to the applicable statutory conditions. Specified movable property, including shares, securities, jewellery, art and bullion, is subject to separate fair-market-value tests.

Common statutory exclusions include receipts from defined relatives, gifts on the occasion of an individual's marriage, inheritance or a will, and certain receipts from qualifying institutions or under specified exempt reorganisations. These exclusions have conditions and should not be treated as a blanket exemption.

Who is a relative?

For an individual, the statutory definition includes spouse; siblings of the individual or spouse; siblings of either parent; lineal ascendants and descendants of the individual or spouse; and spouses of the specified relatives. For a Hindu undivided family, it includes any member of that HUF. The exact statutory definition governs.

Example: property purchased below stamp duty value

If consideration is Rs. 50 lakh and stamp duty value is Rs. 56 lakh, the difference is Rs. 6 lakh. The higher threshold is Rs. 5 lakh (10% of consideration), so the difference may be taxable, subject to the valuation and other statutory safeguards.

4. Section 56(2)(viib): angel-tax provision discontinued

The former provision taxed qualifying share consideration received by certain closely held companies in excess of fair market value. Section 56(2)(viib) does not apply from assessment year 2025-26 onward following the Finance (No. 2) Act, 2024 amendment. Historical years may still require examination of the law then applicable.

5. Deductions and related provisions

Section 57 specifies permitted deductions, including certain expenses incurred wholly and exclusively for earning income, subject to conditions. Section 58 restricts deductions. Section 59 addresses recoveries of earlier deductions. Special rates and restrictions can apply to winnings and other particular receipts.

6. Earlier versions and legislative history

The original page contained historical clauses (v), (vi), (vii) and (viia) with their former effective dates, along with legislative footnotes. These are retained below for research, but must not be read as the current charging provisions. In particular, the original page's 5% immovable-property tolerance was superseded by 10%, and its angel-tax description did not reflect the later sunset.

7. Official legislation and guidance

Frequently asked questions

Is every gift taxable?

No. The statutory thresholds and exclusions under section 56(2)(x) apply, including specified family gifts and inheritances.

Is bank interest income from other sources?

Ordinarily yes, where it is not taxable as business income; deductions and exemptions depend on the taxpayer and applicable law.

Can the stamp duty value of a property be challenged?

In qualifying circumstances the taxpayer may dispute the value and seek the statutory valuation mechanism, subject to the conditions in section 56(2)(x) and related provisions.

Read archived statutory extracts and amendment notes from the original page

(1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head Income from other sources, if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E.

(2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head Income from other sources, namely:

(i) dividends;
1 (ia) income referred to in sub-clause (viii) of clause (24) of section 2;
2 (ib) income referred to in sub-clause (ix) of clause (24) of section 2;
3 (ic) income referred to in sub-clause (x) of clause (24) of section 2, if such income is not chargeable to income-tax under the head Profits and gains of business or profession;

4 (id) income by way of interest on securities, if the income is not chargeable to income-tax under the head Profits and gains of business or profession;

(ii) income from machinery, plant or furniture belonging to the assessee and let on hire, if the income is not chargeable to income-tax under the head Profits and gains of business or profession;

(iii) where an assessee lets on hire machinery, plant or furniture belonging to him and also buildings, and the letting of the buildings is inseparable from the letting of the said machinery, plant or furniture, the income from such letting, if it is not chargeable to income-tax under the head Profits and gains of business or profession;

5 (iv) income referred to in sub-clause (xi) of clause (24) of section 2, if such income is not chargeable to income-tax under the head Profits and gains of business or profession or under the head Salaries;

6 (v) where any sum of money exceeding twenty-five thousand rupees is received without consideration by an individual or a Hindu undivided family from any person on or after the 1st day of September, 2004 7 but before the 1st day of April, 2006, the whole of such sum:

8 (e) from any local authority as defined in the Explanation to clause (20) of section 10; or

(f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or

(g) from any trust or institution registered under section 12AA.

Explanation. For the purposes of this clause, relative means
(i) spouse of the individual;
(ii) brother or sister of the individual;
(iii) brother or sister of the spouse of the individual;
(iv) brother or sister of either of the parents of the individual;
(v) any lineal ascendant or descendant of the individual;
(vi) any lineal ascendant or descendant of the spouse of the individual;
(vii) spouse of the person referred to in clauses (ii) to (vi);

9 (vi) where any sum of money, the aggregate value of which exceeds fifty thousand rupees, is received without consideration, by an individual or a Hindu undivided family, in any previous year from any person or persons on or after the 1st day of April, 2006 10 but before the 1st day of October, 2009, the whole of the aggregate value of such sum:

Provided that this clause shall not apply to any sum of money received
(a) from any relative; or
(b) on the occasion of the marriage of the individual; or
(c) under a will or by way of inheritance; or
(d) in contemplation of death of the payer; or
(e) from any local authority as defined in the Explanation to clause (20) of section 10; or
(f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or
(g) from any trust or institution registered under section 12AA.

11 (vii) where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009 12 but before the 1st day of April, 2017,
(a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum;
13 (b) any immovable property,
(i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;
(ii) for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration:

Provided that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of this sub-clause:

Provided further that the said proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by any mode other than cash on or before the date of the agreement for the transfer of such immovable property;

(i) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property;

(ii) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration:

Provided that where the stamp duty value of immovable property as referred to in sub-clause (b) is disputed by the assessee on grounds mentioned in sub-section (2) of section 50C, the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of section 50C and sub-section (15) of section 155 shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of sub-clause (b) as they apply for valuation of capital asset under those sections:

Provided further that this clause shall not apply to any sum of money or any property received-
(a) from any relative; or
(b) on the occasion of the marriage of the individual; or
(c) under a will or by way of inheritance; or
(d) in contemplation of death of the payer or donor, as the case may be; or
(e) from any local authority as defined in the Explanation to clause (20) of section 10; or
(f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or
(g) from any trust or institution registered under 14 section 12AA; or

15 (h) by way of transaction not regarded as transfer under clause (vicb) or clause (vid) or clause (vii) of section 47.
Explanation.-For the purposes of this clause,-
(a) "assessable" shall have the meaning assigned to it in the Explanation 2 to sub-section (2) of section 50C;
(b) "fair market value" of a property, other than an immovable property, means the value determined in accordance with the method as may be prescribed;
(c) "jewellery" shall have the meaning assigned to it in the Explanation to sub-clause (ii) of clause (14) of section 2;
(d) "property" 163 means the following capital asset of the assessee, namely:-
(i) immovable property being land or building or both;
(ii) shares and securities;
(iii) jewellery;
(iv) archaeological collections;
(v) drawings;
(vi) paintings;
(vii) sculptures; 17 ***
(viii) any work of art; 18 or

18 (ix) bullion;
19 (e) "relative" means,-
(i) in case of an individual-
(A) spouse of the individual;
(B) brother or sister of the individual;
(C) brother or sister of the spouse of the individual;
(D) brother or sister of either of the parents of the individual;
(E) any lineal ascendant or descendant of the individual;
(F) any lineal ascendant or descendant of the spouse of the individual;
(G) spouse of the person referred to in items (B) to (F); and

(ii) in case of a Hindu undivided family, any member thereof;
(f) "stamp duty value" means the value adopted or assessed or assessable by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property;

20 (viia) where a firm or a company not being a company in which the public are substantially interested, receives, in any previous year, from any person or persons, on or after the 1st day of June, 2010 21 but before the 1st day of April, 2017, any property, being shares of a company not being a company in which the public are substantially interested,-

(i) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property;
(ii) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration:

Provided that this clause shall not apply to any such property received by way of a transaction not regarded as transfer under clause (via) or clause (vic) or clause (vicb) or clause (vid) or clause (vii) of section 47.

Explanation.-For the purposes of this clause, "fair market value" of a property, being shares of a company not being a company in which the public are substantially interested, shall have the meaning assigned to it in the Explanation to clause (vii);

22 (viib) where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares:

Provided that this clause shall not apply where the consideration for issue of shares is received-
(i) by a venture capital undertaking from a venture capital company or a venture capital fund; or
(ii) by a company from a class or classes of persons as may be notified by the Central Government in this behalf.

Explanation.-For the purposes of this clause,-
(a) the fair market value of the shares shall be the value-
(i) as may be determined in accordance with such method as may be prescribed; or
(ii) as may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, whichever is higher;

(b) "venture capital company", "venture capital fund" and "venture capital undertaking" shall have the meanings respectively assigned to them in clause (a), clause (b) and clause (c) of 23 Explanation to clause (23FB) of section 10;

24 (viii) income by way of interest received on compensation or on enhanced compensation referred to in clause (b) of section 145A;

25 (ix) any sum of money received as an advance or otherwise in the course of negotiations for transfer of a capital asset, if,-
(a) such sum is forfeited; and
(b) the negotiations do not result in transfer of such capital asset.
26 (x) where any person receives, in any previous year, from any person or persons on or after the 1st day of April, 2017,-
(a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum;
(b) any immovable property,-

(A) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;

27 (B) for a consideration, the stamp duty value of such property as exceeds such consideration, if the amount of such excess is more than the higher of the following amounts, namely:-
(i) the amount of fifty thousand rupees; and
(ii) the amount equal to five per cent. of the consideration:

Provided that where the date of agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of agreement may be taken for the purposes of this sub-clause:
Provided further that the provisions of the first proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by way of an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank account, on or before the date of agreement for transfer of such immovable property:

Provided also that where the stamp duty value of immovable property is disputed by the assessee on grounds mentioned in sub-section (2) of section 50C, the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of section 50C and sub-section (15) of section 155 shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of this sub-clause as they apply for valuation of capital asset under those sections;

(c) any property, other than immovable property,-
(A) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property;
(B) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration:

Provided that this clause shall not apply to any sum of money or any property received-
(I) from any relative; or
(II) on the occasion of the marriage of the individual; or
(III) under a will or by way of inheritance; or
(IV) in contemplation of death of the payer or donor, as the case may be; or
(V) from any local authority as defined in the Explanation to clause (20) of section 10; or
(VI) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or
(VII) from or by any trust or institution registered under section 12A or section 12AA; or

(VIII) by any fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10; or

(IX) by way of transaction not regarded as transfer under clause (i) or 28 clause (iv) or clause (v) or clause (vi) or clause (via) or clause (viaa) or clause (vib) or clause (vic) or clause (vica) or clause (vicb) or clause (vid) or clause (vii) of section 47; or

(X) from an individual by a trust created or established solely for the benefit of relative of the individual.
Explanation.-For the purposes of this clause, the expressions "assessable", "fair market value", "jewellery", "property", "relative" and "stamp duty value" shall have the same meanings as respectively assigned to them in the Explanation to clause (vii).

29 (xi) any compensation or other payment, due to or received by any person, by whatever name called, in connection with the termination of his employment or the modification of the terms and conditions relating thereto.
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1. Ins. by Act 10 of 1965, s. 18 (w.e.f. 1-4-1965).
2. Ins. by Act 16 of 1972, s. 10 (w.e.f. 1-4-1972).
3. Ins. by Act 11 of 1987, s. 26 (w.e.f. 1-4-1988).
4. Ins. by Act 26 of 1988, s.18 (w.e.f. 1-4-1989).
5. Ins. by Act 33 of 1996, s. 21 (w.e.f. 1-10-1996).
6. Ins. by Act 23 of 2004, s. 13 (w.e.f. 1-4-2005).
7. Ins. by Act 29 of 2006, s. 10 (w.e.f. 1-4-2006).
8. Ins. by Act 22 of 2007, s. 19 (w.e.f. 1-4-2005).
9. Ins. by Act 29 of 2006, s. 10 (w.e.f. 1-4-2007).
10. Ins. by Act 33 of 2009, s. 26 (w.e.f. 1-10-2009).
11. Ins. by Act 33 of 2009, s. 26 (w.e.f. 1-10-2009).
12. Ins. by Act 7 of 2017, s. 29 (w.e.f. 1-4-2017).
13.. Ins. by Act 17 of 2013, s. 11 (w.e.f. 1-4-2014).
14. Subs. by Act 28 of 2016, s. 35, for "section 12AA" (w.e.f. 1-4-2017).
15. Ins. by s. 35, ibid. (w.e.f. 1-4-2017).
16. Subs. by Act 14 of 2010, s. 21, for "means-" (w.r.e.f. 1-10-2009).
17. The word "or" omitted by s. 21, ibid. (w.e.f. 1-6-2010).
18. Ins. by s. 21, ibid. (w.e.f. 1-6-2010).
19. Ins. by Act 23 of 2012, s. 21 (w.e.f. 1-10-2009).
20. Ins. by Act 14 of 2010, s. 21 (w.e.f. 1-6-2010).
21. Ins. by Act 7 of 2017, s. 29 (w.e.f. 1-4-2017).
22. Ins. by Act 23 of 2012, s. 21 (w.e.f. 1-4-2013).
23. Subs. by Act 17 of 2013, s. 11, for "Explanation 1" (w.e.f. 1-4-2014).
24. Ins. by Act 33 of 2009, s. 26 (w.e.f. 1-4-2010).
25. Ins. by Act 25 of 2014, s. 25 (w.e.f. 1-4-2015).
26. Ins. by Act 7 of 2017, s. 29 (w.e.f. 1-4-2017)
27. Subs. by Act 13 of 2018, s. 23, for item (B) (w.e.f. 1-4-2019).
28. Ins. by Act 13 of 2018, s. 23 (w.e.f. 1-4-2018).
29. Ins. by s. 23, ibid. (w.e.f. 1-4-2019).