As per Section 2(41) of Income Tax Act, 1961, unless the context otherwise requires, the term “relative”, in relation to an individual, means the husband, wife, brother or sister or any lineal ascendant or descendant of that individual.
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Furthermore, for the purpose of exempting certain gifts received from relatives under Section 56(2)(v), the term “relative” has been defined in the Explanation to the said clause to include:
(i) spouse of the individual;
(ii) brother or sister of the individual;
(iii) brother or sister of the spouse of the individual;
(iv) brother or sister of either of the parents of the individual;
(v) any lineal ascendant or descendant of the individual;
(vi) any lineal ascendant or descendant of the spouse of the individual;
(vii) spouse of the person referred to in clauses (ii) to (vi).
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In view of above, Its important to understand the meaning of term ‘relative’ in the context of Income Tax Act/ Rules as there are many circumstances where disallowances or certain tax liabilities have been stipulated under difference IT Sections/ Rules, which may occur due to transactions even with a relative.