India being the land of festivities has a constant inflow and outflow of gifts. A gift from USA to India or gifts from India to USA complements the emotional quotient of the people in these two countries who are staying apart but keep on sending happiness in boxes to each other at a magical frequency. Now, these boxes are metaphorical! Well, some are literal too. But most of these gift exchanges happen online in the form of bank transfers, real estate, shares etc. In this article, we will discuss the angles around gifts to India from USA or vice versa, focusing on the taxation and exemptions provided under the NRI Gift Tax Rules.
Gift from USA to India: A Background
Every year, a large number of Non-Resident Indians (NRIs) send gifts to India to their family, friends and other relatives and receive gifts from them in return. The Indian gifts have a wrapping of emotions around them that need to be carefully secured around related aspects like taxation, exemptions and documentation. In the next segments, we will understand these aspects one by one.
Gifts to India from USA: What to bring?
NRIs are always asking the same questions: What are the best gifts to bring to India? How can they find the perfect gifts to send to India from USA? Well, the best gift in our understanding would be money. Bringing gifts to India from USA has a certain ring to it and that’s alright. You can bring in some toys or chocolates for the kids but as far as sharing a gift with family, friends or relatives is concerned, money would be the best out of the lot. Let’s see why:
- No transport/delivery issue
- The money can be traded for anything that the receiver wants
- Can be used as a form of savings
- Can be invested for better returns
Apart from money, gifts in kind such as gold, real estate, shares etc. are also a good way to move ahead with considering the dynamics of the relationship. For example, many NRIs have expressed their wish to buy a house for their parents in India or maybe a car. Some invest in various asset classes and gift commodities or shares to their family members, friends etc. In essence, there is a wide range of things to choose from that can be contemplated as a gift.
What is NRI Gift Tax India?
NRI Income Tax is very concrete. As an NRI, only your income generated in India is taxable while the global income is taxable for a Resident Indian. Now, as you send and receive gifts to/from your family, friends or relatives in India, the purview of taxation becomes active. There are certain restrictions and exemptions considering the NRI Gift Tax in India which we have covered in our article Gift by NRI to Resident Indian or Vice-Versa: Taxation and more.
However, let us take a look at the brief overview of NRI Gift Tax Rules for NRI:
- Taxation on gifts is different for relatives and non-relatives
- Gifts to relatives are exempt from tax in India for both giver and receiver
- Gifts to non-relatives are exempt from tax for both giver and receiver if the amount is under Rs.50,000
- Gifts to non-relatives above Rs.50,000 is taxable at the hands of the receiver
- Gifts for marriage or through will are exempt from taxation in India for both giver and receiver irrespective of the relationship
Gift Tax exemption relatives list
Now, we have discussed that the gift tax in India is different for relatives and non-relatives. Let’s learn who is classified as a relative under the NRI gift tax rules. Listed below are relations for which the tax on gifts are exempted:
- Child’s Spouse
- Grandchild’s Spouse
- Sibling’s Spouse
- Step-sister and Step-brother
Note: Everyone else is simply considered as a non-relative.
How to gift money to parents in India?
Many NRIs from the USA have been asking us the same questions centered around gift from USA to India for their parents. These questions had different angles too that involved gifts to Indian grandparents or receiving a cash gift from a relative. There is a very simple process for gifting money to your parents or grandparents in India. All you need to do is just credit their bank accounts with the money using either of your NRI Bank Accounts.
However, in case of a cash gift from relative, make sure that such gifts are received through cheques or bank account transfers as cash gifts exceeding Rs. 2,00,000/- can be subject to a penalty.
Get a Gift Deed with Expert Assistance
In the article, we learnt the fundamentals of gift tax in India along with understanding who are exempted from such taxation. But, what weighs in equally here is the documentation part. Since, there is an angle of taxation involved, it seems better that you record the gift in a document as a proof to validate the amount or asset received qualifying it as a gift. The document that is used for such purpose is called a gift deed. You can get a free template of the gift deed for both movable and immovable assets. Just let us know if you need one.
Also, if you have queries/service requirements around NRI Banking, Investments, Taxation, Real Estate or any other aspect related to India, then you can connect directly with our experts on WhatsApp using the button below. Also visit our blog and YouTube Channel for more details.
US and Indian governments don’t impose any limit on money that can be transferred to India from the US. However, the bank or money transfer service provider that you are using might place some restrictions on how much money you can transfer in a single transaction.
No tax is charged for transfers up to $14,000 in a year. For a fund transfer above $14,000 per year, the sender is liable for paying the taxes.
You can receive up to Rs. 10 lakh per annum from your relatives abroad.
India has signed a Double Taxation Avoidance Agreement (DTAA) with many countries, including the US. It aims to ensure that you don’t pay taxes on the income earned from the home country or host country. If you are taxed twice, you can reach SBNRI to assess the specific provisions to claim a tax credit.