The Bombay HC has refused interim relief to a same-sex couple challenging the exemption for gifts from “spouse” under Section 56(2)(x) of the IT Act.
The recent order of the Bombay High Court has brought significant attention to the treatment of same-sex couples under the Income-tax Act, 1961. In a case that challenges the constitutional validity of Section 56(2)(x), the Court refused to grant interim protection to a same-sex couple seeking exemption from gift tax on the ground that they should be treated as “spouses”.
The decision highlights a crucial gap in Indian tax law—same-sex couples are not legally recognised as “spouses”, and therefore cannot claim the gift-tax exemption available to married couples. This has direct implications for high-value transactions, gift-tax litigation, and income-tax notices issued under AY 2024-25 and upcoming assessment cycles.
This article summarises the case, the legal issues involved, and the practical impact for taxpayers and consultants.
Background of the Case
A same-sex couple approached the Bombay High Court challenging the constitutionality of Section 56(2)(x) of the Income-tax Act, which taxes gifts exceeding ₹50,000 received from non-relatives.
The fifth proviso to Section 56(2)(x) exempts gifts received from certain “relatives”, including a “spouse”.
Since Indian law does not legally recognise same-sex marriage or civil unions, gifts exchanged between same-sex partners do not qualify for this exemption.
The petitioners argued that:
- The exclusion is discriminatory under Articles 14 and 15 of the Constitution;
- Same-sex partners should be treated as “spouses” for the purpose of gift-tax exemption;
- Until final adjudication, they should be protected from any coercive action or tax demand.
What the Bombay High Court Held
The Division Bench refused to grant interim relief, stating that:
- The term “spouse” must be understood within existing marriage laws, which currently recognise only heterosexual marriages.
- The Court cannot expand the definition of “spouse” through an interim order.
- Even if the petitioners succeed later, tax paid can be refunded, therefore no urgent unusual protection is required at this stage.
- The matter requires detailed constitutional hearing and cannot be decided hurriedly before the statutory compliance deadline.
Result:
Same-sex couples remain outside the exemption framework of Section 56(2)(x) of Income Tax Act 1961, and any gift received from a partner is taxable.
Legal Position Under Section 56(2)(x) – Current Status
- Gifts above ₹50,000 received from a person who is not a “relative” are taxable under “Income from Other Sources”.
- “Relative” includes spouse, parents, siblings, lineal ascendants/descendants, etc.
- Since same-sex partners are not legally recognised as spouses, they fall under “non-relative”.
- Therefore, the gift becomes taxable unless specifically exempt under another clause.
Implications for Same-Sex Couples and Taxpayers
1. Gifts from same-sex partners remain taxable
Any monetary gift, immovable property, or movable property transferred between partners is taxable under Section 56(2)(x), unless a different exemption applies.
2. High risk of receiving Income-tax Notices
Cases of unreported gifts or unexplained credit entries may attract:
- Notice under Section 142(1) (seeking information),
- Notice under Section 143(2) (scrutiny),
- Notice under Section 148 (income escaping assessment),
- Queries regarding mismatch under AIS/TIS.
Given the current legal position, taxpayers in same-sex relationships must maintain strong documentation of:
- Source of funds,
- Gift deed,
- Bank trail,
- Valuation reports (if property involved).
3. Tax planning complexities
Without “spouse” status:
- Tax-free transfer of funds is not possible,
- Clubbing provisions do not recognise such relationships,
- Estate planning becomes more compliance-heavy.
4. Possible refund later
If the High Court eventually rules in favour of recognition, taxpayers may seek:
- Refund of gift tax paid,
- Rectification under Section 154,
- Relief through appellate mechanism.
However, as on date, no exemption exists.
Why This Case Matters for Tax Practitioners & Consultants
This case opens an important chapter in how tax law intersects with equality rights and evolving social norms. For Income Tax Notice Consultants, ITR-U filing experts, and Tax Litigation Professionals, the matter has immediate relevance because:
- High-value gifts between same-sex partners can trigger SFT reporting, followed by income-tax notices.
- Non-disclosure may lead to penalty proceedings for misreporting or under-reporting.
- Clients may seek advisory on risk mitigation, documentation, and advance tax planning.
As per current legislation, no tax professional can advise exemption for gifts between same-sex partners, unless the law is amended or the Court issues a favourable ruling.
Key Takeaways
- The Bombay High Court has refused interim relief to a same-sex couple seeking gift-tax exemption under Section 56(2)(x).
- Same-sex partners are not legally recognised as “spouses”, and therefore cannot claim tax-free gift exemption.
- All such gifts above ₹50,000 remain fully taxable.
- Taxpayers may receive Income Tax Notices if such gifts are not properly disclosed.
- Proper documentation, compliance, and risk-based tax planning are essential.
Petitioners: Payio Ashiho & Vivek Divan (same-sex couple) LawFul Talks+2The Indian Express+2
“Payio AshIho & Anr. v. Union of India & Anr., Writ Petition (L) No. 24345 of 2025”
Respondents: Union of India & the Income‑tax Department LawFul Talks+2Taxscan+2
Case title: “Payio AshIho & Anr. v. Union of India & Anr., Writ Petition (L) No. 24345 of 2025” (as per one report) LawFul Talks
Bench/Judges: Justices B.P. Colabawalla and Firdosh Pooniwalla. Mid-day+2The Indian Express+2
Provision challenged: Fifth proviso to Section 56(2)(x) of the Income‑tax Act, 1961 (exemption for gifts from “spouse” and other relatives) ETGovernment.com+1
Key issue: Whether the term “spouse” in that proviso should include same-sex couples or if its exclusion violates Articles 14/15 of the Constitution.
#IncomeTax #TaxConsultant #Section56 #GiftTax #BombayHighCourt #TaxNotice #FacelessAssessment #IncomeTaxUpdate #TaxAdvisory #IndianLaw #CAinIndia #CAinDwarka #CAinDelhi #CAAlokkumar #TaxConsultant #TaxNoticeConsultant #LGBTQIA #TaxCompliance Income Tax Notice, Section 56(2)(x), Gift Tax, Spouse Definition, Tax Dispute, Income Tax Litigation, Tax Compliance, Gift Tax Exemption, Same-Sex Couple Taxation.
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