Gift by NRI to Resident Indian under FEMA: Gifts have always been a traditional and social convention in India. However, for an NRI (Non-Resident Indian), giving or receiving gifts comes with specific tax laws. Let’s understand rules for tax on a gift by an NRI to a resident Indian under Foreign Exchange Management Act.
Gift by NRI to Resident Indian Under FEMA
As per the Income Tax Act, a gift by an NRI is an asset received without consideration like money or money’s worth. It can be cash, movable or immovable property, jewelry, etc. Most gifts from or to NRIs are taxable. NRIs can give gifts to resident Indian relatives, friends, etc. NRIs can receive up to USD 250,000 per financial year under the Liberalised Remittance Scheme.
However, rules vary for relatives, friends, acquaintances, etc.
Also Read: Gift from USA to India: Taxation and Exemptions
NRI Gift Tax India
In the next few segments, we will understand how giving or receiving these items as gifts can bring in tax implications and who has to bear them.
Gift Tax is different for relatives and non-relatives and varies with the fact as to whom these gifts are given or received from. Given below is a list of people who are considered relatives under the tax regulations:
- Child’s Spouse
- Grandchild’s Spouse
- Sibling’s Spouse
- Step-sister and Step-brother
Everyone else is simply considered as a non-relative.
NRI Gift Rules
In this segment, we have listed out some basic rules and regulations revolving around NRI Gift Tax in India. Following this we will discuss the individual Resident Indian to NRI and NRI to Resident Indian gift exchange scenarios.
- You can give an immovable property to an NRI as gift provided the remittance of sale proceeds doesn’t exceed USD 1 Million per year.
- NRIs can receive gifts from relatives in forms of shares and securities provided it doesn’t exceed 5% of the paid up capital of the company; the sectoral cap isn’t branched and the NRI is eligible to hold the securities.
- Gifts that are received from a specified fund or trust or as a scholarship from educational institutions isn’t taxable.
- Immovable properties outside India received as gifts are exempt from tax.
- The value of the gift can not be considered as deduction while calculating income tax.
- Any income that is received from the gift in India is taxable irrespective of whether the receiver and giver are Resident Indians or NRIs.
- Make sure to have the necessary documentation in place when you receive a gift.
- Cash gifts exceeding Rs. 2,00,000/- can be subject to a penalty. Ensure that such gifts are received through cheques or bank account transfers.
- Union Budget 2023-24 for NRIs, all gifts above Rs 50,000 received by a not-ordinarily resident from a resident Indian as a monetary gift would be deemed to arise in India and would be taxable w.e.f. 1st April 2024.
- Gifts from Resident Indian to an NRI can only be sent to their NRO Account.
In the next segment we will compare the different scenarios based on giving and receiving gifts. Let’s explore
|Gift From NRI to Resident Indian||Gift to NRI by Resident Indian|
|Gift from NRI Relative to a Resident Indian is exempt from tax in India for both giver and receiver||Gift from Resident Indian to NRI Relative is exempt from tax in India for both giver and receiver|
|Gifts to Resident Indians from NRIs (non-relative) within Rs.50,000/- are exempt from tax for both giver and receiver||Gifts from Resident Indians to NRIs (non-relative) within Rs.50,000/- are exempt from tax for both giver and receiver|
|On gifts to Resident Indians from NRIs (non-relative) exceeding Rs. 50,000/-, gift-tax is applicable to be paid by the receiver. (The amount is added to the total income of the receiver and taxed as per their income tax slab)||On gifts from Resident Indians to NRIs (non-relative) exceeding Rs. 50,000/-, gift-tax is applicable to be paid by the receiver. (The amount is added to the total income of the receiver and taxed as per their income tax slab) [Maximum Limit: USD 250,000 per financial year defined under LRS (Liberalized Remittance Scheme)]|
|Gifts to Resident Indians from NRIs (irrespective of relation) for marriage or through will is exempted from tax in India for both giver and receiver||Gifts from Resident Indians to NRIs (irrespective of relation) for marriage or through will is exempted from tax in India for both giver and receiver|
Note: Gifts from Resident Indians to NRIs in the form of shares and securities of an Indian Company, the total value can’t exceed Rs. 50,000/- in one financial year. The gift should follow the regulations of RBI regarding NRIs holding stocks in Indian companies.
It is essential to understand about the regulations and tax implications before sending or receiving any kind of gifts. The issues can get complex based on the residential status of the individual involved in the gift exchange. Therefore, it is also important to check the rules of the country you are staying in regarding Gifts and Gift Tax.
Gift by NRI to Resident Indian or Vice-Versa: NRI Gift Deed Format
Another very important aspect while sending or receiving gifts is keeping a record of the same through gift deeds. Signing a gift deed and keeping them safe can help you to avoid major issues in the future. Many NRIs often look for a simple gift deed format that they can copy and use, let us know if you need one.
What is NRI Gift Deed?
Section 17 of the Registration Act, 1908 requires the NRI donor sign a gift deed. The NRI gift deed is executed between two parties – the donor (who sends gift) and the receiver of the gift. The gift deed must be printed on a stamp paper and all pages signed by both parties.
What’s Great? Now, you can slide into the DMs of our SBNRI Tax Expert on WhatsApp using the button below. Text Now! Clear all your queries today.
You can also visit our SBNRI Blog for more details about NRI Bank Accounts, Investments, Remittances, Taxation and much more.