Gifts have always been a traditional and social convention in India. But when we talk about Gifts by NRI to Resident Indian or by a Resident Indian to an NRI, we can’t skip the mundane yet practical aspects associated with them: Regulations and Taxation.
There can be various mediums, both in cash and kind (jewellery, property etc.) while gifting something to someone. NRIs can give as well as receive gifts and while doing so they need to be aware about the laws and taxation aspects revolving around it. In this article, we will explore the very same aspects.
NRI Gift Tax India
Taxation is a very primary and essential aspect of exchanging gifts in India. The Income Tax Act defines a gift as any asset received without consideration. It can be money or anything else of money’s worth. Inclusions can be cash, property, jewellery etc. 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
- There is a gift tax exemption beyond the limit of Rs. 50,000/- for: Gifts received from a relative, gifts received on marriage and gifts received under will or Inheritance
- 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 by 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.
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