Karnataka High Court Seeks Centre's Reply on Same-Sex Couple's Tax Exemption Challenge

The Karnataka High Court on Tuesday asked the Central Government to respond to a petition filed by a same-sex couple challenging the constitutional validity of a provision in the Income Tax Act that exempts gifts between spouses from tax but excludes same-sex couples.

The petitioners, Anurag Kalia and Akhilesh Godi, both software engineers and IIT alumni, have been in a relationship for over seven years and have lived together since 2019. The dispute arose when Godi gifted Kalia a 22-karat gold bracelet, a family heirloom, on their anniversary. The bracelet was valued at Rs 1,15,500.

Under Section 56(2)(x) of the Income Tax Act, any gift exceeding Rs 50,000 in value is taxable as 'income from other sources' unless it is from a 'relative'. The term 'relative' includes a 'spouse'. Since the couple is not married under Indian law, the bracelet was deemed taxable. Kalia was advised to report it as income and pay tax at 25%, plus surcharge and cess.

The couple argued that a heterosexual couple living together for a prolonged period would be presumed married under the law and thus qualify for the exemption. They contended that denying them the same benefit solely on the basis of their sexual orientation violates Articles 14 (equality), 15 (non-discrimination), 19(1)(a) (freedom of speech), and 21 (right to life) of the Constitution. They cited Supreme Court rulings, including the 2018 decision that 'sex' under Article 15 includes sexual orientation.

Justice B M Shyam Prasad, presiding over the case, narrowed the issue to whether a court can expand the definition of 'spouse' when the legislature has not defined it. The court observed that if it were to find the provision discriminatory, it would open the door for other relationships to claim the exemption.

A similar petition is pending before the Bombay High Court. The Karnataka High Court is expected to hear the matter further after the government's response.