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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{ 166 comments… read them below or add one }

jin June 12, 2013 at 4:34 pm

had a few questions:
1. is there any tax associated with gifting a land from daughter(NRI) to dad(Indian Resident) on the Indian side?
2. On the US side, it looks like the person gifting the land has to pay taxes irrespective of daughter-father relation. Is that true, if so how does the calculation work?

Reply

Manshu June 14, 2013 at 2:54 am

1. No, there is no gift tax in this case.
2. Sorry, not aware of this answer.

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Gopal June 13, 2013 at 11:05 am

Hi, I am an NRI but I regularly file Income Tax returns in India for my India Income. I want to gift INR25Lacs to my father who is a resident Indian and an income tax assessee. I had transferred the requisite amount to my NRE a/c in India. But somehow, I transferred INR10Lacs to my NRO account out of that remittance. Now, Can I gift INR15Lacs from NRE a/c and INR10Lacs from NRO a/c to my father so that it is tax free in his hands and in my hands also? What documents, if any, may be required by the income tax authorities in India for the assessment of my father’s or my own?

Reply

Manshu June 14, 2013 at 2:26 am

Gifts are tax free so you can give this to your father. I’m not sure about documentation, he may need to show it as a gift in his assessment and the bank statement may be enough but I don’t know this for sure.

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Manikaran Singal June 17, 2013 at 5:57 pm

Yes Gopal, you can do this. gifts from Son to father is totally tax free in father’s hand. It doesn’t matter from which account the amount is getting transferred. For you it is already out of tax paid income, so you don’t have to pay any extra tax. You don’t have to do any documentation for this. If at all you want to do the same, than you can write a simple Gift deed saying that you are gifting this much amount out of natural love and affection to your father on plain piece of paper quoting yours and your father’s PAN number.

Reply

Lata June 19, 2013 at 1:38 pm

I am Indian citizen and staying and working in India. I wish to gift to my younger married sister. I am of 58 yrs, single and have no liability. How much maximum amount I can gift to my sister and how can I claim rebate in my income tax return ?

Reply

Manikaran Singal June 22, 2013 at 11:11 am

Lata, you can gift any amount without any limit. There’s no rebate available on gifting. Its just that for your sister, the gift received will not be taxed.

Reply

S.Vaidyanathan June 28, 2013 at 11:20 am

Dear Sir,

I have released a site of my father to my sister through a release deed registered with the local authorities. My sister inturn has given me a gift of Rs. 12 lacs. Is this taxable? Please let me also know what are the documentations required for this gift from my sister.

Regards,
S.Vaidyanathan

Reply

Manshu June 30, 2013 at 8:56 am

I am sorry, not familiar with rules on release deeds.

Reply

S.Vaidyanathan July 1, 2013 at 1:17 pm

This is a inherited property from my late father, which is shared by all the sons and daughters of my father. All of us have given in writing to my elder sister that we will relinquish our rights on the property (which is in the form of release deed). The site has now been transferred from my father to my sister. Inturn, my sister has given us 12 lakhs. My question is whether we can consider this 12 lakhs as gift since it does not attract any gift tax.

Reply

Anand July 10, 2013 at 1:51 am

I like to gift my father a house , which I have in my name. can i gift him. What is the procedure.

Reply

Manikaran Singal August 16, 2013 at 10:52 am

You have to draft a gift deed on a stamp paper, get it witnessed by 2 witnesses and register it. Registering a gift deed especially in case of immovable property is mandatory,failing which the transfer would be invalid. Also pls note that this transfer would be irrevocable. Once the property is gifted you will not be able to reverse the transaction and not even ask for any compensation.

Reply

Pooja July 11, 2013 at 3:58 pm

I received a gift from my parent company in the US 2 years back. Does the company I work for in India (wholly owned subsidiary of the parent company) have the right to collect Gift Tax now after my return to India?

Reply

Manikaran Singal August 16, 2013 at 11:05 am

Gift from your company. Great!! but pooja, your company doesn’t come in the definition of relative, so better talk to your company’s tax accountant. Depending on the type of gift if tax laws say so, then your tax calculation will automatically take into account that gift. As your employer will pay your tax and file your return as far as salary income is concerned, so don’t worry if that gift is taxable then your company will take care of it.

Reply

anil July 14, 2013 at 11:24 pm

Hi

My father in of Indian nationality, lives and has retired in India. I am a british citizen and have been in the UK for more than 10 year.s

He’s wishes to send me a million dollars, I understand that no tax is payable because he is my father. is there any issues on sending the money to UK?
Do you know efficient methods to send large amounts from india to the UK?

thanks

anil

Reply

Manshu July 15, 2013 at 8:12 pm

Sorry I am not aware of a way to do this.

Reply

ravif July 23, 2013 at 12:11 pm

What documentation is required for IT authorities for gift from a relative? Is the fact that the amount comes from a relative sufficient.

Reply

Manikaran Singal August 16, 2013 at 11:10 am

If the amount is significant then better to draft a gift deed by mentioning the pan number of the giver and receiver and do mention that he’s giving gift due to natural love and affection.

Reply

Farooq July 26, 2013 at 12:16 pm

Hi,

I had brought a gemstone in Dubai which turned out to be an antique / collectors item. Now still I am abroad and here a person wants to buy it. Will the remittances of this sale to my account in India taxable? Your immediate response will be highly appreciated. THANKS

Reply

Henna July 30, 2013 at 12:53 pm

Hi,
As I understand gift from specific relatives is tax free for recipient. For donor also there is no issue. However if recipient is not a minor child, or spouse or son’s spouse then the interest/ money made on the gift is taxable from recipients income. Else interest/ money made on gift is taxable from donor income.

My question are: please consider gift higher than 50K.
1) I am married woman and my parents gave me cash exceeding 50k and I made 2FD for same in 2 banks. Bank has already deducted tax. I am showing interest as income from other sources. How should I show the tax that bank has already deducted?

Question 2) my father in law gave me money which I put in my ppf. I am showing ppf as savings under section 80C. Anything I need to be aware of?

Question 3) My parents gave me money to decrease liability of my home loan. Anything from tax angle here?

Question 4) my parents gave me money which is lying in my salary/savings account. Any tax implication here?

Please provide responses to me. Would be grateful. I am assuming in all above cases that money I initially received that is principal is not be shown as any income. If I m wrong please correct me and let me know which ITR form I need to fill.

Reply

RAJAT July 30, 2013 at 1:06 pm

Hi, My grandfather divided his entire immovable assets and distributed as per his will to his 3 sons. Can these sons gift their portion to their sons or daughters as per their will. If yes what kind of tax liability shall fall.Please advise . Regards

Reply

priti August 9, 2013 at 7:59 pm

my sister wants to give me Rs.5 lacs. she is working with LIC. how she can gift me
can you explain me.whether she has to do certain legal process or filing of document

Reply

paresh rege August 12, 2013 at 2:07 pm

we have a flat in mumbai which holds name of my mother and her brother . the property is duely registered in 1981. now the said property is going for redevelopment. my mother’s brother wants to gift the property to my mother. what would be the tax implications?

Reply

Rita August 20, 2013 at 2:53 pm

My Parents want to gift me Rs 10,00,000 towards part contribution of Purchasing a flat of about 1 crore. Would they have to pay any Gift tax? Would any additional tax be levied on me?

Reply

Manshu August 20, 2013 at 8:24 pm

No as long as tax has already been paid on this money – neither you nor them need to pay any tax again.

Reply

Bll August 25, 2013 at 1:20 pm

I live in delhi. I am working but expenses are more than earning as my husband is unemployed. Also i m planing to do some study/course.
My younger brother works in US frm one year and earns well. I have requested him to send me some money for my need and some for downpayment of a flat for me. Can u pls tell me any tax implications for both of us? Also how best way he can send me money? Bank transfer or western union??? Urgent pls

Reply

Naresh Chandra Jain August 27, 2013 at 12:42 pm

Dear sir,
Can my son NRI/POI donate shares of indian companies to his mother (indian citizon).

Reply

vikas mishra September 7, 2013 at 10:18 am

Hi, I am a NRI in USA. My brother in India bought an apartment on his and my father’s name last year. It was for 1 crore. I have been paying most of that on construction linked plan since last year and has payed almost half of it by now. I don’t want my brother and father to pay me back this amount. I have been paying this through my NRE bank account. The checks go directly to builder’s account. Any tax implications.? Is it possible that I can just say that I wanted to help my brother and father in this way and don’t want the money back from them? Can I avoid showing it like gift or lending.

Reply

Anil jain September 17, 2013 at 1:17 pm

Dear Sir ,
I have gift my partnership in my family owned business to my wife . Second partner in the firm is my son and there is no monetary transaction included but when i gone to register it at registrar office he said you have to 6% of stamp duty on it . As you cannot gift your partnership stake to anyone. Please advise .

Warm regards
Anil Jain

Reply

ANUPAMA GARG September 18, 2013 at 8:55 am

my mother in law gifted a property to me .I reconstructed and sale it what is tax position on it

Reply

akila September 20, 2013 at 12:26 pm

Hi.. Am selling my house in Chennai and am due to receive about 1.6 cr for it.. I don’t own any other houses and am not employed anywhere.. Of the money received i wanna purchase two flats each about 50l each in my name,which i was told is tax exempted.. Apart from this i would like to gift 20 l each to my 3 siblings. Could you please tell me how this can be done? And also if there is any tax that i d incur? Also if not as Money can i gift them that amount in the way of a down payment for aprtments in their names which they could later pay off through housing loans..? Thanks in advance..

Reply

Suraj Gaikwad November 13, 2013 at 8:09 pm

Hi. The flat is registered in the name of my mother and i have 1 sister who is married. Now i want to transfer the flat ownership to my name by the way of gift transfer and stamp duty is around Rs.180000/-. I want to know that the stamp duty to be paid by me will be considered for tax exemption or so? Please advise.

Suraj

Reply

Ganesh Jayaraman November 27, 2013 at 10:35 am

Hi, My mother in law is going to dispose of a house property registered in her late husband’s name and is going to give a third of the proceeds to my wife( apprx Rs.1300000) and another third to her son(my Brother in law). What is the tax implication? Does my wife need to pay tax on her share (she is a housewife)?

Reply

bindu January 8, 2014 at 3:06 pm

need to make a gift deed…my sister has gifted me a car…so need
to make a gif deed for the same..pls help

Reply

bindu January 9, 2014 at 3:11 pm

hi..my moms sister has transfered an amount to my bank account …she is a tax payee n residing ion India…will i have to make a gift deed or a letter from her and will I also be paying tax for the same…also whats the maximum one can transfer

thank un

Reply

Manshu January 9, 2014 at 6:06 pm

Since she is a relative it isn’t taxable, and there is no upper limit either.

Reply

GAURAV GAGNEJA January 28, 2014 at 10:20 pm

I WANT TO GIVE GIFT OF RS. 50000 IN CASH TO MY MOTHER. CAN I AVAIL ANY CLAIM IN INCOME TAX

Reply

Rajesh Kumar Khurana February 15, 2014 at 1:23 pm

Please let me know that My father want to gift me a newly constructed floor of a house in Delhi of 150 sq yards, if I wish to get it registered in my name how much registration tax/duty I have to pay for it.
thanks & regards

Reply

sachdev March 4, 2014 at 11:48 am

my wifes cousin that is her buas son that means my wifes fathers sisters son wants to give my wife a gift cheque of Rs.500000 would there be any tax element attached to it pls advice urgently thank you.

Reply

Ronfire777 March 21, 2014 at 4:03 am

Hello
When my wife and I were married 12 years ago, her mother gifted my wife a sum of money, which we placed in joint TD’s in India. The accounts are NRO and have remained with the same bank since then.

With the recent change in rules regarding transfer to NRE/repatriation, I would like to find out whether a gift received shortly after marriage meets the criteria for transfer to NRE or repatriation overseas (within the financial year limits allowed)?

Thanks

Reply

Dominic Deepan April 7, 2014 at 12:47 pm

hi,

my friends from u.s wants to buy a land in india, chennai. and amount is 6cr when converted to indian ruppees. i am aware of gift tax.

i just want to know, what are the documents i need? i askd with my hdfc banker. bt am nt satisfied with thier answer.

if my send me email that he is transacting money from u.s as gift to me, will that be taken as a proof.

Reply

Nirmalya Guha April 8, 2014 at 11:26 pm

Hello Sir

I learnt that the amount of money that I gift to my parents is exempted from income tax on my side i.e I can claim tax return on the same amount.
If this is applicable, I would like to know the procedure of such gifting and what proof I need to provide to Tax authorities to claim tax benefit.

Thanks
Nirmalya

Reply

Jeeva April 10, 2014 at 3:03 pm

Hi,
I am working in Netherlands, and I am employed here for past 2 years.
And I am keep transferring my money to my Indian bank account.
Could you tell me, what is the maximum amount I can transfer as tax free per year?
Do I need to file tax return in India every year?

Regards,
Jeeva

Reply

naveen April 15, 2014 at 4:17 pm

Hi,

I got rs 10 lack from my father in my bank account. Is this my income? We have to make any paper for this ammount.
Pls reply
Thnx
Naveen

Reply

sanjay April 20, 2014 at 6:19 pm

sir,
i have learnt that i can gift an amount to my very senior citizen dad for opening FD in his nameand avoid clubbing of income from the interest generated on from that FD .

kindly tell me the procedure to do that to satisfy the IT authorities.

–sanjay

Reply

Ajay Maurya April 21, 2014 at 8:34 pm

Dear all,

what is gift tax rate in India

From Ajay

Reply

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