Many taxpayers have traditionally followed one of two approaches when receiving gifts from specified relatives such as parents, spouse, children, siblings, or certain lineal ascendants and descendants.
One school of thought has been that such gifts need not be reported in the income-tax return at all, since they are specifically exempt from tax under the Income-tax Act. Another view has been to voluntarily disclose these receipts under the “Exempt Income” schedule, typically by selecting “Others” and providing a brief narration.
About the author: Manmohan Sethumadhavan is a freelancer, investor, and personal finance enthusiast “in search of the absolute truth.” You can follow Manu on Twitter @ManuTsr. He is the author of the popular Revised Capital Gains Taxation Rules Ready Reckoner for FY 2025-2026.
While such disclosure was not legally mandatory, it often provided a practical advantage by creating a clear trail linking the receipt of funds to the subsequent acquisition of assets, thereby reducing the likelihood of questions about the source of investments or deposits at a later stage.
Until recently, the return filing utility provided sufficient flexibility for this approach. Taxpayers could select “Others” under exempt income and explain the nature of the receipt, including exempt gifts from relatives. However, from FY 2025–26 (AY 2026–27) onwards, the reporting structure has become considerably more restrictive.
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Thanks to Manoj Dhawan in AIFW for pointing this out. The exempt income schedule now operates through predefined categories and sub-categories, with no specific option available for exempt gifts from relatives and no free-text narration field. As a result, taxpayers who preferred to disclose such gifts voluntarily may no longer have a straightforward mechanism to do so on the return.
While this does not alter the tax treatment of such gifts, which remain exempt where the statutory conditions are satisfied, it does mark a significant change in how taxpayers can document these transactions in the income-tax return itself.
The change restricting “Other Exempt Income” in Schedule EI to a predefined list of dropdown options is visible in the ITR2 Validation Rules for AY 2026-27 (as of the version released on 26-05-2026). (For simplicity, I am referring to ITR2 only; this is applicable to other ITRs also).
There is an addition of specific validation rules (Rules 698 through 745) that dictate exactly which predefined items can be selected under the “Other Exempt Income” dropdown. Also, each predefined sub-menu item can be selected only once. If you look at the validation rules for the previous year (AY 2025-26), you will not find this exhaustive list of dropdown restrictions.
Instead, the older rules simply contain a generic validation (Rule 455) which states that the total of “Other exempt income” (including exempt income of a minor child) should equal the value entered in the amount columns. Therefore, the restriction forcing users to select predefined sub-menu items rather than allowing a free-text “Others” field is directly enforced by Rules 698 to 745 in the AY 2026-27 validation schema.
The available options in Schedule EI in ITR2 is as follows:
1 Interest Income
2. Agricultural Income
3 Other exempt income (including exempt income of a minor child)
== 1. Agricultural & related incomes
* 10(30)-subsidy received from or through the Tea Board
* 10(31)-Subsidy received for Rubber/Coffee/Tea replantation, replacement, rejuvenation etc.
* 10(37) Capital gains on compulsory acquisition of urban agricultural land
== 2. Compensation/other sums received by government or other approved entities
* 10(10BB)-payments made under the Bhopal Gas Leak Disaster
* 10(10BC)-amount from the Central/State Govt./local authority by way of compensation on account of any disaster
* 10(17A)-Award instituted by Government
== 3. Income from specified Investments
* 10(12AB)-any sum received as lump sum amount as per clause (vi) of paragraph 2 of the notification number FX-1/3/2024-PR
* 10(15)-Interest on specified securities/investments
* 10(23FBB)-income referred to in section 115UB, accruing or arising to, or received by, a unit holder of an investment fund
* 10(23FD)Unit holder income from Business Trust (certain parts)
* 10(35)-Income from specified Mutual Funds
* 10(35A)-distributed income referred to in section 115TA received from a securitisation trust
* 10(23FBC) Any income from a unit holder from a specified fund or on transfer of units in a specified fund
* 10(33) Income from transfer of capital asset being a unit of the Unit Scheme, 1964
* 10(4B)-Interest on specified savings certificates
* 10(4C)-Interest on Rupee denominated bonds (specific window)
* 10(4E)-Non-deliverable forwards/ODI/OTC with IFSC OBU
* 10(36)-LTCG on certain listed shares (public issue)
* 10(37A)-any income chargeable under the head “Capital gains” in respect of transfer of a specified capital asset
== 4. Specified sums received by armed forces personnel
* 10(12C)-Agniveer Corpus Fund income
* 10(18)-Pension received by winner of “Param Vir Chakra” or “Maha Vir Chakra” or “Vir Chakra” or such other gallantry award
* 10(19)-Armed Forces Family pension in case of death during operational duty
* 10(23AA)-Sum received by any person on behalf of any Fund established by the armed forces
* Defense Medical Disability Pension
== 5. Sums received by Senior Citizens/Minors
* 10(32)-Minor child’s income—small exemption
* 10(43)-Reverse mortgage—payments to senior citizens
== 6. Sums received by specified Category of Taxpayers
* 10(19A)-Annual value of one palace in occupation of ex-ruler
* 10(26)-Any income as referred to in section 10(26)
* 10(26AAA)-Any income as referred to in section 10(26AAA)
== 7. Sums received from policies/contributions such as LIC/NPS/PF/Sukanya Samriddhi Yojana
* 10(10D)-Any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy except sum as mentioned in sub-clause (a) to (d) of Sec.10(10D)
* 10(11)-Statutory Provident Fund received
* 10(11A)-Sum received from an account opened under the Sukanya Samriddhi Yojana
* 10(12)-Recognized Provident Fund received
* 10(12A)-Any payment from the National Pension System Trust to an assessee
* 10(12AA)-any payment from the National Pension System Trust
* 10(12B)-Any payment from the National Pension System Trust to an Central Govt. Employee
* 10(12BA)-partial withdrawal made from the National Pension System
* 10(13)-Approved superannuation fund received
* 10(25)-Sum received by trustees on behalf of approved superannuation, gratuity, or pension funds
* 10(44)-Income received by any person for, or on behalf of, the New Pension System Trust
== 8. Other Incomes
* 10(2)-Member’s share from HUF
* 10(16)-Scholarships for education
* 10(4)(ii)-NRE account interest
4. Income claimed as not chargeable to tax as per DTAA (Applicable for Non-Residents only)
5. Pass through income claimed as not chargeable to tax (Schedule PTI)
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