My grandmother wants to gift cash to me. What are the income tax implications?

livemint.com:

My grandmother is a senior citizen and wishes to gift me money in cash. Can she gift me in cash? If yes, is there any limit under the Income Tax Act or any other law?

There is no limit to which a person can give a gift to another person. There is also no restriction on the amount which can be gifted in cash. However, there is a limit of ₹two lakh beyond which one cannot accept cash for any transaction including gift from the same person at a time. 

So though your grandmother can gift you any amount in cash, you cannot accept gifts over 2 lakh in cash at a time. So in case the amount that your grandmother intends to give you is more than 2 lakh please carry out the transaction through a banking channel to comply with the law. 

Moreover, it is anyway advisable not to accept any gift in cash to avoid any harassment and litigation in the future from the tax department. In case your income tax return is selected for detailed scrutiny, your grandmother may have to prove the source of such money if the amount involved is huge. 

In case you accept a single cash gift from the same person beyond ₹2 lakh, the income tax department can levy a penalty equal to the amount of the gift accepted in cash.

Please note that none of you have any tax liability for this transaction of gift as gifts received from specified relatives are not treated as income under section 56 (2) of the Income Tax Act, 1961. Grandparents are covered within this definition of specified relatives, so any amount of gift received from your grandmother will be fully tax-exempt in your hand. Likewise, your grandmother also does not have any tax liability on this transaction. Any income earned by you from investments made from such gift will be included in your income.