(Photo by Rahul Sapra via Bigstock)
India’s Income Tax Department has opposed a same-sex couple’s petition that challenges Section 56(2)(x) of the Income Tax Act.
The provision exempts gifts between spouses from tax. The couple seeks the same benefit for their relationship.
At the center of the challenge is the explanation to the fifth provision of Section 56(2)(x). According to the petition, the provision excludes same-sex partners from the definition of “spouse.” The petition describes that exclusion as unconstitutional.
The provision defines “relative” to include an individual’s spouse, siblings, the spouse’s siblings, parents’ siblings, and other blood relatives.
Paiyo Ashiho and another petitioner, Vivek Divan, asked the Bombay High Court to recognize same-sex couples presumed to be in a marriage as “spouses” under the fifth provision to Section 56(2)(x).
A similar challenge is pending before the Karnataka High Court.
Bengaluru-based engineers Anurag Kalia and Akhilesh Godi have sought similar relief. Kalia said he wanted to give Godi a gold bracelet worth more than ₹115,500 ($1213.44.). The case remains pending.
The Prime Minister Narendra Modi-led government rejected the petition in an affidavit filed last year. It argued the plea was not legally tenable because it challenged no action or order of the Income Tax Department. Calling the petition an “abuse of process of law,” the government said the relief sought fell outside the scope of the Income Tax Act, 1961.
The government also argued the petitioners sought the benefits available to a “spouse” without legal recognition of their relationship. According to the affidavit, they had not placed on record any law recognizing their relationship as a marriage. It urged the court to dismiss the petition with costs.
The case returned to the spotlight on July 6, when the Bombay High Court heard the petition.
Justices B.P. Colabawalla and Firdosh P. Pooniwalla adjourned the matter after Solicitor General Tushar Mehta said he would appear on behalf of Modi’s government.
The petition comes nearly two years after the Indian Supreme Court’s marriage equality ruling.
In 2023, a five-judge Constitution Bench, in a 3-2 verdict, declined to recognize the constitutional validity of same-sex marriage in India. The country’s top court said MPs must decide whether to extend marriage rights to same-sex couples.
During the 2023 marriage equality hearings, lawyer Abhishek Manu Singhvi told the Supreme Court that marriage is a source of social validation, dignity, self-respect, fulfillment, and security. He argued that it also carries legal and civil benefits, including those related to taxation, inheritance, and adoption. Lawyer Anand Grover, who also appeared for the petitioners, told the court that marriage remains fundamental to the functioning of society and is necessary to access several state benefits, including joint tax benefits and surrogacy rights.
Chief Justice Dhananjaya Y. Chandrachud, in his minority opinion, said the Income Tax Act provides numerous tax benefits for payments made on behalf of a spouse, including deductions for life and health insurance premiums. He also noted that marriage confers several financial benefits on a spouse, including eligibility for gratuity, funeral expenses, medical benefits, and provident fund claims as the dependent of a deceased spouse.
In the marriage equality ruling, the Supreme Court recognized queer people cannot be discriminated against. The court said denying queer couples the material benefits and services available to heterosexual couples violates their fundamental rights.
While issuing directions to the federal, state, and territory governments; Chandrachud said the government should ensure there was no discrimination in access to goods and services. He also directed governments to sensitize the public about queer rights, establish a hotline for the queer community, create safe houses for queer couples, and ensure intersex children were not forced to undergo medical operations.
The petition is awaiting its next hearing before the Bombay High Court.
India’s tax system relies on both direct and indirect taxes, although its direct tax base remains relatively narrow. Individuals pay income tax at progressive rates of up to 30 percent, while consumers pay taxes on most goods and services through the Goods and Services Tax. The Income Tax Act also provides exemptions, deductions, and other tax benefits for eligible taxpayers, including those linked to family relationships and legal marital status.
India’s LGBTQ community is estimated to comprise between 135 million and 140 million people, or nearly 10 percent of the country’s population. Collectively, it is estimated to have a purchasing power exceeding $168 billion. The World Bank estimated that exclusion based on sexual orientation and gender identity cost India between $1.9 billion and $30.8 billion in lost economic output annually, or up to 1.7 percent of its gross domestic product.
India imposed a separate Gift Tax Act in 1958 to tax certain transfers of property made without consideration. Parliament repealed the law in 1998 to simplify the tax system and encourage genuine gifting. However, concerns over tax avoidance later prompted the government to bring gifts back within the Income Tax Act. Today, specified gifts exceeding prescribed limits may be taxed under Section 56(2)(x), subject to exemptions that include gifts received from relatives.
Under the Income Tax Act, gifts received from non-relatives exceeding ₹50,000 ($525.30) in a financial year are generally treated as taxable income, unless they qualify for a statutory exemption. Gifts received from specified relatives, including a spouse, are exempt from tax regardless of their value.
Tarun Khaitan — a research director and professor of public law at the London School of Economics Law School, honorary professorial fellow at Melbourne Law School, and associate fellow of the Bonavero Institute of Human Rights at the University of Oxford — told the Washington Blade the guarantee of equality and non-discrimination under India’s constitution was deliberately framed in broad terms because its framers envisaged that the understanding of those principles would evolve over time. They did not intend to freeze their meaning in 1950, he said. Instead, older and newer statutes alike must be interpreted in light of the constitution’s contemporary understanding.
“Constitutional values must inform the interpretation of all laws in India. It is well established in Indian jurisprudence that if a term can carry two meanings, the court will give it the meaning that complies with constitutional demands,” Khaitan said. “The term ‘spouse’ is not defined in the Income Tax Act, and unlike ‘husband’ or ‘wife’ is not a legal term of art in Indian family law. Its use by the Income Tax Act therefore is apt for judicial interpretation, which must be guided by the constitutional guarantees of equality and liberty.”
Asked how courts should balance respect for legislative choices with their constitutional responsibility to safeguard equality and dignity, Khaitan said he was not convinced that the legislature had made a clear choice in this case. He noted that the Income Tax Act uses the term “spouse” without defining it, adding that no other Indian law, to his knowledge, defines the term either. Its meaning has evolved over time, he said, pointing to the Oxford English Dictionary, which now defines a spouse as “a husband or wife, or a person joined to another in a comparable legally recognized union.”
Khaitan said the decision to restrict the meaning of “spouse” to different-sex married couples appeared to be the government’s interpretation rather than one expressly adopted by MPs. Even so, he said, courts have a duty to safeguard constitutional rights, although those rights are not absolute. The state, he said, must justify any restriction by demonstrating that it serves a sufficiently important public interest and that the limitation is proportionate to that objective.
“The extension of marriage would be a symbolic expression of equal acceptance of same-sex relations by law as well as a the extension of the bundle of material incidents that typically attach to it. Whether or not such extension happens, concerns such as inheritance, hospital visitation rights, decisions regarding end of life care, pensions etc affect the lives of same-sex couples as well as unmarried different-sex couples in a real, material sense,” Khaitan said. “There is no conceptual reason why the expressive salience of ‘marriage’ and the material incidents of a domestic partnership cannot be unbundled.”
Khaitan has had his scholarship cited by the Supreme Court in several constitutional cases, including Navtej Singh Johar v. Union of India, which decriminalized consensual same-sex relations, and Lt. Col. Nitisha v. Union of India, a landmark judgment on indirect discrimination.
The National LGBT Media Association represents 13 legacy publications in major markets across the country with a collective readership of more than 400K in print and more than 1 million + online. Learn more here: NationalLGBTMediaAssociation.com.
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