Income Tax on Gifts from NRIs and Relatives in India

by Guest Blogger on November 21, 2012

in Tax

This article is written by Aashish Ramchand, a Chartered Accountant by profession. Aashish is the co-founder of makemyreturns.com. He also has completed his CFA Level I (American) and is very passionate about writing articles on taxes and tax advisory. He can be reached at connect@makemyreturns.com

Generally, gifts are not regarded as Income chargeable to tax. However by virtue of Section 56(2) any sum of money exceeding Rs. 50000 received without consideration by an individual or an HUF from any person is chargeable to tax as income under other sources subject to exclusions as below:

  1. Receipts on occasion of marriage of the individual
  2. Receipts under a will or inheritance
  3. Receipts received from a relative.

Since 1/10/2009, Section 56(2) has been amended and the scope of gifts and will include even immovable properties or any other property besides sums of money under its ambit.

Gifts that are not taxable at all are those that are received from relatives. Relatives are defined by the following relationships of the individual:

  1. Parents
  2. Parents siblings and their spouse
  3. Siblings
  4. Spouse of siblings
  5. Daughter and son
  6. Spouse of daughter and son
  7. Spouse
  8. Spouse’s parents
  9. Spouse’s siblings and their respective spouse.

Even NRIs are covered as long as they fall in the category of relatives. Therefore an individual Indian resident can receive a tax free gift from an NRI as long as he/she is that individuals relative. Any amount can be received as a gift from a relative. Also the purpose for which the gift is received from a relative is inconsequential as it is completely tax free. Thus a gift received can be used for any purpose ranging from purchasing shares to buying property to even simply keeping it with the bank.

Note on gifting on immovable properties

There is a valuation aspect involved in gifting of immovable properties:-

  1. If the property is gifted without any consideration then if the stamp duty value exceeds Rs. 50000/-, stamp duty value will be taken
  2. If the property is gifted for a consideration, then the actual value of the property will be taken

In case of other properties:

  1. If gifted without consideration and fair market value exceeds 50000, then the fair market value will be taken as the final value
  2. If gifted for a consideration and the FMV less consideration is greater than 50000, then the FMV less consideration amount will be taken as the value of the gift.

As mentioned earlier NRIs can also give gifts to resident Indians. Therefore, It is important to understand the meaning of an NRI as per the IT act.

An individual will be treated as a non resident in India in any previous year if he fulfils any of the following two conditions:

  1. he/she is NOT in India in that year for period or periods amounting in all to 182 days or more, or
  2. Having within the four years preceding that year NOT been in India for a period or periods amounting in all to 365 days or more, and has NOT been in India for 60 days or more in that year.
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{ 318 comments… read them below or add one }

ASHISH CHOUDHARY December 11, 2014 at 5:50 pm

Dear Sir,
what is the point of taxation in the hands of donor in case of cash gift given to a freind in his marriage of whatsoever amount, how will the donor treats the gift in his books in case he is an individual and has no business income.

Reply

Jitendra P.S.Solanki December 14, 2014 at 9:04 am

Ashish,

Donor can treat the amount as gift in his books as there is no tax liability on the donor for the gift. This is also due to the fact that whatever gift you give to anyone is after paying your personal income tax. Its the donee i.e. person who is receiving the gift who has to pay the tax if its above the threshold limit and from a non-relative.

Reply

Shailesh Dubey December 13, 2014 at 2:41 pm

What will be the capital gain implications if we sold the gifted flat from my brother who had purchased land and construct a building and give me a flat as gift?

Reply

Abhishek December 16, 2014 at 2:59 am

Can my masi daughter give me monetary gift.

Reply

meera December 18, 2014 at 2:45 pm

My wife is housewife. I purchased a property in joint name with my wife(House wife). No money is contributed by her. I sell the property after three years and paid capital gains tax on whole sales proceeds recd both by me and my wife. The sales proceeds recd by me is given by me to my wife as interest free loan.
Now my wife purchases the property from the loan given by me and out of the sales proceeds recd by her from the first property in her name.
She sells the property and earns long term capital gain.
In whose hand is the capital gains taxable–In wife hands or husband

Reply

Sunil nayak December 24, 2014 at 9:09 am

Dear Sir,

this is sunil, i am 45 years old and one lady from England made me next kin of her since nobody is to inherit her. She wants to transfer some amount through bank deposited. If i get money then is it taxable? To avoid tax what are the measurements can be taken. What documents to be shown to the bank or RBI. Please help me out. What are the best options?

Thanks a lot

sunil

Reply

R B SHANKAR RAO . December 24, 2014 at 10:11 am

Dear sir ,
I want to give gift to my son who is employed and got married , one 3bhk flat in the apartment which was developed by my builder in my self acquired land ,under development cum building agreement .It is known that gift deed shall be registered for the same as it being immovable property .
I need to have an advice from you that such gift is taxable under gift tax act .
THANKS AND REGARDS .

Reply

Rajani December 30, 2014 at 12:33 am

Hi ,

Thank you for covering this interesting topic.
These are the few doubts I have,
1. Is an NRI allowed to transfer money to parents.
2. And if the parents are allowed to buy agricultural land with that money

3. The NRI later inherits the agricultural land from the parents, through a gift deed or after the demise of the parent.

4. Isnt this method allowing all the NRI ‘s to invest and buy agricultural land through this route.

Please explain.

REgards

Rajani

Reply

santosh January 3, 2015 at 5:37 pm

I Can purchase or not gifted property. Father property given to daughter is gift as per income tax but I not a family member not relative give the reason.

Reply

shalini January 9, 2015 at 6:41 pm

My mother wants to gift me a property.kindly let me know the process.

Reply

sunay January 10, 2015 at 8:41 am

can a customer buy a plot from developer which is gained by a developer as gifted land?

Reply

sri January 11, 2015 at 4:11 pm

Hey,

If I receive ~5lakhs INR from my parents, do me and my parents have to pay gift tax for the amount.
If yes, how do we declare this as gift from parents and next steps for both the parties.

Please advice.

Thanks,
Sridevi

Reply

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