Grandparents gifts Rs.5 lakhs to a grandchild - What will be the tax treatment?

Since the grandson is a lineal descendant of the grandparents , the gift received from them is considered to be from a "relative" as per the Income Tax Act. Therefore, the gift of Rs. 5 lakhs is exempt from Income tax under Section 56(2)(x).

No requirement to show this gift in the income tax return as taxable income 

@ Apurba Pandit

As per Section 56(2) of the I-T Act, no gift tax is payable for a Grandparent giving gift [No Cash Gift over 50K] to the grandchild.

Since no tax is payable, there is no requirement of mentioning it in ITR. 

However, it is always safe to keep a certificate of GIFT from the Donor to the Receipient for any future queries [if any] from the I-T Dept. The Certificate should clearly mention the Relationship

Gifts received from grandparents are not taxable, whether in cash or kind, irrespective of the amount.

But if this gifted amount earns interest , then that interest is taxable and must be clubbed with the parent’s income (usually the higher-earning parent).

As per Section 10(32) Rs.1,500 exemption per child per year is available to the parent whose income includes the minor's income

Specify the naturè of gift as it is exempted u/sec 56(2)(x)