Bhai Dooj 2026: Transferring ₹5 lakh to your sister? Know when a sibling’s cash gift is tax-free and when it is taxable
Bhai Dooj celebrates the bond between brothers and sisters, with gifts and financial support often forming part of the occasion. Some brothers may choose to go beyond traditional presents and transfer a substantial amount of money to their sisters. A ₹5 lakh bank transfer, for instance, may appear to have tax implications, but the Income-tax Act provides an exemption for genuine gifts exchanged between specified relatives.
Under the Income-tax Act, 2025, which came into effect on 1 April 2026, money received by an individual from a brother or sister is exempt from income tax, irrespective of the amount. However, this exemption does not mean that siblings can exchange large sums in any form. Separate provisions restrict high-value cash transactions, making the mode of transfer equally important.
Section 92(3) of the Income-tax Act, 2025, exempts gifts received from specified relatives from taxation. The definition includes a spouse, brother or sister, siblings of the spouse, siblings of either parent, lineal ascendants and descendants, and certain spouses of these relatives.
Therefore, a brother can transfer ₹5 lakh to his sister without the amount being taxed in her hands. There is no monetary ceiling on this exemption. The same provision applies when a sister gifts money to her brother.
This exemption is not restricted to Bhai Dooj. It applies to genuine gifts exchanged between qualifying relatives throughout the year, irrespective of the occasion.
For gifts received from people who do not qualify as relatives, the general threshold is ₹50,000. If the aggregate value of monetary gifts received without consideration exceeds ₹50,000 during a tax year, the entire amount becomes taxable under the head 'Income from other sources', unless another statutory exemption applies.
While a ₹5 lakh gift from a brother is exempt from income tax, the recipient cannot accept the amount in cash. Section 186 of the Income-tax Act, 2025, restricts the receipt of ₹2 lakh or more otherwise than through prescribed banking and electronic modes.
The restriction applies when the amount received from a person is ₹2 lakh or more in aggregate in a single day, in a single transaction, or in transactions relating to one event or occasion.
This means a brother should transfer the ₹5 lakh through an account-payee cheque, bank draft, electronic clearing system or another prescribed electronic mode. A bank transfer through NEFT, RTGS, IMPS or UPI also provides a transaction trail.
Importantly, the restriction applies even if the gift is otherwise exempt from income tax. Under Section 451, the assessing officer may impose a penalty equivalent to the amount received in violation of Section 186. A prohibited cash receipt of ₹5 lakh could therefore attract a penalty of ₹5 lakh.
The tax exemption does not cover everyone considered a relative in everyday conversation. Cousins and friends are not included in the specified definition of relatives under Section 92.
Consequently, if someone receives ₹5 lakh as a gift from a friend or cousin, the entire amount is generally taxable under 'Income from other sources'.
The ₹50,000 threshold is particularly important here. If gifts from non-relatives exceed this limit in aggregate during a financial year, the entire amount becomes taxable, not merely the portion exceeding ₹50,000.
Although a genuine gift from a sibling is exempt, recipients should maintain records to establish the nature and source of a substantial transfer.
A bank statement and transaction confirmation can establish the movement of money. Siblings can also prepare a simple gift declaration mentioning the donor's name, recipient's name, relationship, amount and date of transfer.
The recipient should also remember that while the gift itself is tax-free, income subsequently earned by investing that money, such as interest or capital gains, may be taxable under the applicable provisions.
Kirti jha
Kirti Jha is a Senior Content Producer at Mint, where she writes on mutual funds, taxation, personal finance and macroeconomic developments. Her reporting focuses on helping readers understand complex financial developments through data-driven, research-backed stories that explain how policy changes, market trends and regulatory decisions affect investors and households. <br><br> Before joining Mint, Kirti worked at ET Money, where she specialised in mutual fund research and investment analysis. She tracked portfolio disclosures, fund manager strategies, sectoral allocation shifts and investment trends, distilling large datasets into investor-focused insights. Her work combined quantitative analysis with consumer-centric storytelling, enabling readers to better understand fund positioning, portfolio changes and long-term investment opportunities.<br><br> Kirti holds a Bachelor's degree in Economics from Indraprastha College for Women, University of Delhi, and a Master's in Finance from the Jindal School of Banking & Finance at O.P. Jindal Global University. Her academic training emphasised analytical thinking, quantitative research and financial decision-making, providing a strong foundation in understanding capital markets, financial systems and economic policy. With a combined experience in investment research and financial journalism, she is committed to producing accurate, accessible and insightful journalism that empowers readers to make well-informed financial decisions.
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