The term “relative” under the Income Tax Act, 1961, is not uniformly defined but varies significantly based on the specific section being applied, leading to distinct tax outcomes for different transactions. For general purposes (Section 2(41)), a relative is narrowly defined to include the husband, wife, brother, sister, or any lineal ascendant or descendant of an individual. However, for tax-critical provisions like the taxation of gifts (Section 56(2)(x)), the definition expands significantly to exempt gifts received from a wider family circle, including the brother/sister of either parent, and the spouse of a lineal ascendant/descendant. Similarly, for clubbing of income with a spouse (Section 64), the definition is narrower, mirroring the general definition. Conversely, the rules governing trust exemptions (Section 13) and authorized representatives (Section 288) adopt the broadest scope, incorporating an individual’s spouse’s siblings, their lineal ascendants/descendants and their spouses, and lineal descendants of the individual’s or spouse’s siblings. This segmented approach means that a person considered a relative for receiving a tax-free gift may not be one for an authorized representation, underscoring the requirement for precise sectional reference in tax compliance.
Meaning of relatives under Income-tax Act, 1961
| Section | Provision | A person included in relative |
| Section 2(41) | Section 2 defines the various important words used under multiple provisions of the Income-tax Act, 1961. | Relative in relation to an individual means the husband, wife, brother or sister, or any lineal ascendant or descendent of that individual. |
| Section 13 | Section 13 specifies the circumstances under which the exemption under Section 11 and Section 12 would not be available to trust. These circumstances include the creation of a trust for a particular religious community or caste, application of income for the benefit of the interested person, investment of funds in impermissible mode, etc.
One of the circumstances is -An organisation may lose its exemptions under Section 11 and Section 12 if part of the income is used or applied for the benefit of an interested person, then only such part of the income shall not be considered for the exemption to the trust or institution. Here, “interested person” means – (a) The author of the trust or the founder of the institution; (b) Any person whose total contribution to the trust or institution, during the relevant previous year exceeds Rs. 1 lakh, or, in aggregate up to the end of the relevant previous year exceeds Rs. 10 lakh, as the case may be; (c) Where the author, founder, or substantial contributor is a HUF, a member of the HUF; (d) Any trustee of the trust or manager of the institution; (e) Any relative of such author, founder, member, trustee, or manager as aforesaid; and (f) Any concern in which any of the persons referred to above [except (b)] has a substantial interest. |
Relative in relation to an individual for the purpose of section 13 means:
(a) Spouse of the individual; (b) Brother or sister (and their spouses) of the individual; (c) Brother or sister (and their spouses) of the spouse of the individual; (d) Any lineal ascendant or descendant (and their spouses) of the individual; (e) Any lineal ascendant or descendant (and their spouses) of the spouse of the individual; (f) Any lineal descendant of a brother or sister of either the individual or of the spouse of the individual. |
| Section 56(2)(x) | Section 56(2)(x) is applicable when any person receives from any person any benefit whose value exceeds Rs. 50,000.
Deemed income arises under this provision where any person receives gifts or acquires an immovable property or specified moveable assets without consideration or for inadequate consideration. The deemed income under this provision arises from the following transactions: (a) A sum of money received without consideration; (b) An immovable property received without consideration; (c) An immovable property received for inadequate consideration; (d) A specified movable property received without consideration; and (e) A specified movable property received for inadequate consideration. Note: This provision is not applicable if any sum of money or property is received from any relative |
Relative for the purpose of Section 56(2)(x) means:
I. In the 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). II. In the case of a HUF – every member of such HUF. |
| Section 64 | Section 64 contains provisions for clubbing of income of another person with the income of the taxpayer.
The clubbing provisions have been introduced to stop taxpayers from diverting a part of their income to relatives to reduce the tax burden. Section 64(1)(ii) provides that if an individual has a substantial interest in a concern, any income by way of salary, commission, fees, or any other form of remuneration paid to the spouse of the said individual from that concern is included in the total income of such individual. However, clubbing provisions don’t apply if the remuneration payable to the spouse is attributable to his or her technical or professional qualifications. In this situation, such remuneration is assessable as the personal income, of the earning spouse. Meaning of Substantial Interest: Where remuneration is payable by a company – an individual is deemed to have a substantial interest in such company if its equity share capital carrying not less than 20% of voting power is, at any time during the previous year, owned beneficially by such individual either alone or with one or more of his/her relatives. Where remuneration is payable by a non-corporate entity –an individual is deemed to have a substantial interest therein if he/she, either by self or with one or more relatives, is entitled in the aggregate, at any time during the previous year, to not less than 20% of the profits of such concern. |
Relative for the purpose of section 64 means husband, wife, brother, sister, or any lineal ascendant or descendant of an individual. |
| Section 80E | An individual is allowed to claim a deduction under Section 80E in respect of interest paid on an education loan taken for the higher education of himself or his relative. The deduction is available for 8 assessment years commencing from the assessment year in which the assessee starts paying the interest on a loan. | Relative in relation to an individual, means the spouse and children of that individual or the student for whom the individual is the legal guardian. |
| Section 288 | As per Section 288, any assessee who is entitled or required to attend before any income-tax authority or the Appellate Tribunal in connection with any proceeding may attend by an authorised representative. | For the purposes of Section 288, “relative” in relation to an individual, means—
(a) spouse of the individual; (b) brother or sister of the individual; (c) brother or sister of the spouse of the individual; (d) any lineal ascendant or descendant of the individual; (e) any lineal ascendant or descendant of the spouse of the individual; (f) spouse of a person referred to in clause (b), clause (c), clause (d), or clause (e); (g) any lineal descendant of a brother or sister of either the individual or the spouse of the individual. |
[As amended by Finance Act, 2025]
Very Apt