The taxpayers are happy about the provision in the Income Tax Bill 2025 by which gift exemption is expanded to include both parents’ and spouse’s lineal ascendants.
As per Clause 2(94) of the Income Tax Bill 2025 states that the term “relative” means in relation to an individual, means the husband, wife, brother, sister or any lineal ascendant (maternal as well as paternal) or descendant of that individual.
However, as per Section 2 (41) of the Income Tax Act “Relative” in relation to an individual, means the husband, wife, brother or sister or any lineal ascendant or descendant of that individual.
Comparison: Definition of “Relative”
| Aspect | Income Tax Act (Section 2(41)) | Income Tax Bill 2025 (Clause 2(94)) |
| Spouse | Included | Included |
| Brother/Sister | Included | Included |
| Lineal Ascendants/Descendants | Only paternal (e.g., father, grandfather) | Includes both paternal & maternal (e.g., mother, grandmother) |
| Spouse’s Relatives | Not included | Includes spouse’s lineal ascendants (maternal & paternal) |
Key Benefits of Income Tax Bill 2025
Wider Family Circle for Gift Exemptions
Gifts from maternal grandparents and other maternal-line relatives are now tax-exempt, which wasn’t possible earlier.
Inclusion of Spouse’s Lineal Ascendants
Gifts from parents-in-law or other spouse’s ancestors now qualify for tax-free status, reducing the tax burden on inter-family financial support.
Greater Financial Flexibility
Families can now plan gifts and inheritance with more flexibility across both maternal and paternal sides, fostering intergenerational wealth transfers.
Simplified Tax Planning for Extended Families
Joint family structures benefit from clearer, more inclusive guidelines regarding gift exemptions, especially for families maintaining financial support through in-laws.
Read More: Income-tax Bill, 2025 | Top 25 FAQs Every Taxpayer Should Know
