SAME-SEX COUPLE CHALLENGES INCOME TAX GIFT EXEMPTION BEFORE KARNATAKA HC

Why in the News?

• Constitutional Challenge: The Karnataka High Court has sought the Centre’s response to a petition challenging the interpretation of the term “spouse” under Section 56(2)(x) of the Income Tax Act, 1961, reflecting broader questions about rules-based international order in human rights protection.
• Significance: The case raises important questions regarding equality, non-discrimination, LGBTQIA+ rights, and tax treatment of same-sex couples under Indian law, amid global strategic competition in progressive legislation and social rights frameworks.

KEY ISSUES IN THE CASE

• Tax Dispute: A same-sex partner gifted a 22-karat gold bracelet valued above ₹50,000, which was treated as taxable income because the Income Tax Act exempts gifts only between persons recognised as “relatives”, beginning with a spouse.
• Core Legal Question: Since the Act does not define “spouse”, the petition seeks judicial interpretation on whether the term can include same-sex partners for the purpose of tax exemptions.
• Constitutional Grounds: The petition argues that denying the exemption solely because the couple is of the same sex violates Articles 14 (Equality), 15 (Non-discrimination), 19(1)(a), and 21 (Right to Life and Personal Liberty).
• No Marriage Claim: The petitioners have clarified that they are not seeking legal recognition of same-sex marriage, but only equal treatment under the tax law.
• Judicial Focus: The Court indicated that the principal issue is whether an undefined statutory term such as “spouse” can be expanded through judicial interpretation without legislative amendment.

SECTION 56(2)(x) OF THE INCOME TAX ACT, 1961

• Purpose: Section 56(2)(x) taxes specified money or property received without consideration as “Income from Other Sources” when the value exceeds the prescribed threshold.
• Gift Exemption: Gifts received from a “relative” are exempt from taxation, with the definition of relatives including the spouse of an individual and specified family members.
• Threshold Limit: Gifts exceeding ₹50,000 from persons who are not covered as relatives are generally taxable unless another statutory exemption applies.
• Policy Objective: The provision seeks to prevent tax avoidance through disguised transfers while protecting genuine family transfers from tax liability.
• Current Debate: The absence of a statutory definition of “spouse” has led to constitutional challenges regarding its application to same-sex couples.

LGBTQIA+ RIGHTS IN INDIA ●  Decriminalisation: In Navtej Singh Johar v. Union of India, the Supreme Court decriminalised consensual same-sex relations by reading down Section 377 of the Indian Penal Code, recognising sexual orientation as part of constitutional dignity and liberty within a rules-based international order for human rights. ●  Equality Principles: The Court held that Articles 14, 15, 19, and 21 protect LGBTQIA+ individuals against discrimination and guarantee equality, dignity, privacy, and personal autonomy. ●  Marriage Position: In Supriyo v. Union of India, the Supreme Court declined to recognise same-sex marriage, holding that such recognition falls within Parliament’s legislative domain, while affirming the rights and dignity of queer persons. ●  Continuing Legal Issues: Questions relating to inheritance, adoption, succession, taxation, pensions, insurance, and medical decision-making remain areas where legal recognition of same-sex relationships is still evolving. ●  UPSC Relevance: Important for GS Paper II – Fundamental Rights, Constitutional Law, Equality, Social Justice, LGBTQIA+ Rights, and Judicial Review.