The Union government has defended provisions of the Income Tax Act before the Karnataka High Court, arguing that tax exemptions on gifts between relatives are based on legally verifiable family relationships rather than an individual’s sex. The submission was made during the hearing of a petition filed by a Bengaluru-based same-sex couple seeking equal tax exemption benefits on gifts exchanged within their relationship.
Representing the central government, Additional Solicitor General Aravind Kamath stated that Section 56(2)(x) of the Income Tax Act classifies relatives through established legal statuses, such as marriage or blood ties like sibling relationships. Under current tax regulations, any money or property worth more than Rs 50,000 received without monetary consideration is treated as taxable income under “income from other sources,” unless the transaction occurs between recognized relatives. Kamath argued that limiting exemptions to legally defined relationships allows tax authorities to verify property transfers with minimal intrusion, questioning how assessing officers could practically evaluate un-codified “stable relationships.”
During the proceedings, Justice B M Shyam Prasad remarked that Parliament defined specific exempt relationships to prevent potential misuse of the provision, noting that judicial reinterpretation could introduce uncertainty into tax administration. The High Court will resume hearing the matter on August 4.
Challenge Over Heirloom Gift Tax
The legal petition was filed by Anurag Kalia and Akhilesh Godi, two Bengaluru-based software engineers and IIT alumni who have been together for more than seven years, cohabiting since 2019 in a jointly owned home. The dispute arose over a 14.41-gram, 22-karat gold bracelet valued at Rs 1,15,500, which Godi gifted to Kalia on their relationship anniversary. The bracelet was a family heirloom Godi had received from his father.
While preparing his tax filings for the 2025-26 assessment year, Kalia was advised that the gift did not qualify for a relative exemption. To comply with tax laws, he was required to obtain a valuation from a registered valuer, declare the fair market value as income, and pay tax at a rate of 25 percent, along with a 15 percent surcharge and a 4 percent cess. By contrast, gifts between married spouses—or heterosexual couples whose long cohabitation creates a legal presumption of marriage—are fully exempt from taxation and do not require disclosure on tax returns.
Claims Of Indirect Discrimination
Advocate Dhruv Janssen-Sanghavi, representing the petitioners, clarified that the couple is not seeking legal recognition of marriage, a declaration of marital status, or a finding that the term “spouse” is unconstitutional. Instead, the petition contends that restricting gift tax exemptions to traditional marital relationships results in indirect discrimination against same-sex conjugal partners who lack genetic ties.
The petitioners maintain that withholding the exemption under Section 56(2)(x) penalizes them solely on the basis of sex, denying them equal protection under Articles 14 and 15 of the Constitution. The plea further asserts that taxing gifts exchanged as expressions of affection violates fundamental rights guaranteed under Articles 19(1)(a) and 21, and asks the court to extend the statutory gift tax exemption to their relationship.
