Rakhi Gifts and Income Tax: Tax-Free or Taxable? For income-tax purposes, “relative” does not mean every person who is a relative in ordinary family language. A person who is undoubtedly a relative in everyday family life may not necessarily qualify as a “relative” under the Income-tax law. The Taxman’s Family TreeFor tax exemptions on gifts, the Income Tax Department specifies the exact list of relatives for an individual. And this is precisely where the Income-tax family tree differs from the family tree we know at home.