Claim audit · FY 2026-27

“Gifting cryptocurrency to a relative is completely tax-free, and later selling it also attracts no tax because the gift exemption under Section 56(2)(x) covers the entire transaction.”

The claim that gifting crypto is entirely tax-free is partly true and partly misleading. Under Section 56(2)(x), gifts received from specified relatives without consideration are exempt from tax in the hands of the recipient. 'Relative' includes spouse, siblings, parents, children, and certain other family members. If a person gifts crypto to a relative, the recipient does not pay tax at the time of receipt, and the donor is not taxed on the gift because gifting is not a transfer chargeable under Section 115BBH. However, the tax is not eliminated. The recipient's cost of acquisition is taken as the fair market value of the crypto at the time of the gift. When the recipient later sells the crypto, the gain is computed as the sale proceeds minus that cost, and the net gain is taxed at 30% under Section 115BBH for assets classified as virtual digital assets. Additionally, tax at 1% is deducted at source under Section 194S on the sale consideration. So the gifting route defers the tax and may split it between two taxpayers, but it does not remove the 30% levy on gains. For example, if A buys crypto for Rs 1 lakh, gifts it to a relative when the FMV is Rs 2 lakh, and the relative sells for Rs 3 lakh, the relative pays 30% on Rs 1 lakh. A does not pay tax at the time of the gift, but the 30% charge is deferred to the sale. If the gift is to a non-relative and the aggregate value of the gift exceeds Rs 50,000, the entire FMV is taxable as income from other sources in the hands of the recipient under Section 56(2)(x), at slab rates. If the recipient later sells, the cost basis is the taxed FMV, and only the additional gain is taxed at 30%. Thus the viral claim that gifting crypto is fully tax-free is false. It is partly true in that the relative-recipient does not pay tax at receipt, but the eventual sale attracts 30% plus 1% TDS, and the non-relative gift triggers immediate slab tax above Rs 50,000. A taxpayer planning such transfers should compute the aggregated gain and consider the bracket of the recipient to understand the true tax cost.