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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{ 366 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

Jitendra P.S.Solanki February 28, 2015 at 6:32 am

Shailesh,

You will be liable for long term or short term capital gains taxation based on holding period of the flat only when you sell the flat. There is no tax liability on gifting the flat. But stamp duty will be payable since this can be done only with a registered gift deed..

Reply

Abhishek December 16, 2014 at 2:59 am

Can my masi daughter give me monetary gift.

Reply

Jitendra P.S.Solanki February 28, 2015 at 6:33 am

Abhishek,

Yes but that won’t be tax exempted in your hand.

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

Jitendra P.S.Solanki February 28, 2015 at 6:39 am

Meera,

In case of housewife any income derived form a gift received by her husband is clubbed with the husband income. Although you have given a loan to your wife but she wont have any income of her own to repay you back so that transaction can be questioned by the IT Officer.

Most likely the tax liability will fall in the hands of the husband since wife do not have any income of her own and tax cannot be avoided by such transactions. You can take view of any good tax expert.

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

Jitendra P.S.Solanki February 28, 2015 at 6:43 am

Sunil,

If there is no blood relation between you then whatever amount she gives you (beyond R 50000) will be taxable in your hand. You cannot avoid the tax. You also need to check the inheritance where you will be paying tax as per England inheritance laws.

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

Jitendra P.S.Solanki February 28, 2015 at 6:47 am

R B Shankar Rao,

Gift received by parents will be tax exempted under the Gift Tax Provision and so you or your son won’t be incurring any tax liability on the gifted value. Yes stamp duty will be payable as it will happen through a registered gift deed.

Reply

Jitendra P.S.Solanki February 28, 2015 at 6:56 am

R B Shankar Rao,

Gift received by children from their parents is also tax exempted.

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

Jitendra P.S.Solanki February 28, 2015 at 8:38 am

Rajani,

The transaction may not be so simple as it looks. There are rules which get applicable from RBI. In my view take assistance of a tax expert specializing in NRI taxation.

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

Jitendra P.S.Solanki February 28, 2015 at 8:43 am

Shalini,

For gifting immovable property a registered gift deed is necessary. The gift deed will be registered in sub-registrar office and stamp duty will be payable as per state laws.

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

Manikaran Singal May 1, 2015 at 4:32 pm

Any gift of any amount received from parents will be tax free in the hands of Children ( Above 18 years). Parents will give gift from tax paid/taxable or non taxable income income , whatever be the source of their income, so there’s no question of gift tax on them too.
For declaring as gift, its better that while doing transaction , both parties write a simple agreement/letter/note on plain paper, by mentioning PAN numbers of each donee and donor, that money is being given as gift under natural love and affection

Reply

manoj January 20, 2015 at 11:31 pm

sir i won bike in lucky draw its amount 60000 its cut 30% tds on this.tell its tax can be return and how

Reply

BS Thakur January 22, 2015 at 12:36 pm

Dear Sir,
My NRI son gifted me Rs.40 lakh in Nov. 2014 from his NRE accounts through cheques in my favour. Can I buy a residential flat with this amount in my name? He has signed a gift deed in my favour which is witnessed by his two colleagues and signed by me at his redience abroad in token of having aceepted the gift and he gave me two cheques which I have not yet deposited in my bank account apprehending some tax liabilities and its utilization for purchase of a flat. These cheques are valid for three months from the date of issue. Is the gift deed given by son in Nov.2014still valid, if I now deposit those cheques bearing date of November in my bank account and use the amount for purchase of a flat? Or Do I need to have fresh gift deed? Now we can not sign gift deed together as my son is now in foreign country and I am in India.
Your reply/guidance is awaited.
Thanks & Regards.

Reply

Manikaran Singal May 1, 2015 at 4:35 pm

Mr Thakur, though i am replying too late, but your transaction seem as genuine transaction to me.
You can do anything with the gifted amount given to you by your son.

Reply

Brenda February 20, 2015 at 2:10 pm

My husband wants to gift a flat on my name what is the procedure to transfer the flat on my name and do i have to pay or just make a gift deed agreement. what is the procedure if i am a housewife or working.

Reply

Utkarsh February 21, 2015 at 7:46 pm

Can my Father’s Brother’s Children give gifts to me

Reply

Vipin February 24, 2015 at 3:43 pm

Hi,
One of my friends from US has gifted me $5000.
What will be the tax implications on the same.
Kindly advice.

Reply

G.S.Prasad February 27, 2015 at 11:06 am

sir,
How much amount that i,can accept as a gifts from non relatives individually from each person each can give me less than Rs 20000.and around 100 friends are there to me. Shall i accept gifts around Rs 20 lacks on the occasion of commencement of my business. kindly guide me.Weather any tax implications are there and these are come under exempted gifts or not ?is there any income tax has to be paid on those gifts kindly guide me.

thanking you sir

Reply

Bilwanandha N B February 28, 2015 at 8:31 am

Hi my father is willing to gift a land to his sister is it taxable as other sources, Both are residents…

Reply

Vivek Sharma March 2, 2015 at 11:39 am

Sir,
I received a gift worth 5 lakhs and sold it for 6.5 lakhs. I donated the entire amount of 6.5 lakhs towards prime minister relief fund. I just want to check if I will have any tax liability on any of the above mentioned amount.

Thanks and Regards

Reply

kirandeep March 3, 2015 at 11:57 am

Hello Sir,
my real brother living in canada want to gift me a plot of land situated in moga(panjab).Guide me with proper procedure and probable charges which i need to pay for this gift deed.Can my brother fulfill all formalities from canada.Later i have to construct house on this plot.for that i will have to take loan ,so guide me about the proper procedure

Reply

alka trivedi March 3, 2015 at 1:11 pm

sir, my friend is sending gift abot 20 lakhs from uk. how much tax i pay

Reply

Darsh March 3, 2015 at 2:11 pm

I have step son leaving abroad can he gift me any amt of money or it is taxable

Reply

paarth March 4, 2015 at 12:16 am

I am 19, and am about to get gold worth more than 50000 USD from an American national (no relation)as a gift. The transaction will be carried out in US. Am I liable to pay taxes. If so, do I have to pay it in both countries? If I keep the gold in US will I be taxed in future just to own it? How much % will be taxed.? I have no other source of income.

Reply

Sanjeev Dhariwal March 4, 2015 at 8:57 am

Sir i want to gift rs 50000 to my mother or brother.can i claim this as deductions in my ITR.if yes then under whuch section?

Reply

Parth March 5, 2015 at 2:47 am

My mother’s brother wants to gift me a jacket which is the cost of about 5200 inr..he is a distant relative so will the gift be tax exempted?

Reply

devangi March 6, 2015 at 10:13 pm

my children receive cash during diwali, birthdays and special occasions. What is the tax treatment of this cash if I am regularly depositing this amount in their bank a/c ( minor a/c) linked to my a/c?

Reply

Devang March 7, 2015 at 8:52 pm

Can my uncle give gift of rs 5 lakh to my daughter? Is it taxable ? Pls help

Reply

Shivang Patel March 13, 2015 at 7:09 pm

I am a Permenant resident in united kingdom. I want to gift 10000 pounds to my father. Do i have to first transfer it to my NRO Account and then gift it or I can Transfer it Directly to his account in India? Please help

Reply

Dipak March 21, 2015 at 10:33 am

I would like to know that a elder brother gifting to younger brother for 10 to 15 lakhs by way of cheques mentioning PAN NO and what is the procedure require.It will do if simply write down the details on a paper gifting the amount.Whether it require to register? Please explain.
Thanks ,
Dipak

Reply

Dipak March 21, 2015 at 10:36 am

I would like to know that a elder brother gifting to younger brother for 10 to 15 lakhs by way of cheques mentioning PAN NO and what is the procedure require.It will do if simply write down the details on a paper gifting the amount.Whether it require to register? Please explain. Elder brother is not filing the return due to no taxable income and above 80 years of age.
Thanks ,
Dipak

Reply

Yatin minkar March 28, 2015 at 8:04 pm

My mother Sister has some agriculture land..she is going to sell it, money will come is tax free . Now she going to gift me more than 50000 .. is this taxable ?

Reply

John April 12, 2015 at 10:38 am

Dear sir,
I am an NRI from Australia. My mother in Law wants to donate some agricultural land to my wife. Is it allowed by Law? Is my wife who is also NRI is allowed to receive it? are we allowed to sell it in the future is she receives it?
Kind Regards
John

Reply

Namchei Riamei April 19, 2015 at 2:30 pm

Dear sir, One of my american friend wanted to send me a gift in cash. How and what are the procedures i need to follow to recieve it?

Please help

Reply

Vaibhav Jain April 20, 2015 at 3:20 pm

Thanks for you effort for clearing so many queries for different issues.
Well I have one query as well, hope you can help in to understand…
I booked a flat in name of my Brother and me in 2011 and now same is ready for registry. My father paid a handsome amount over the period of time from his bank to fulfill the builder payments.
My query is, after the registry done for that flat under mine and brother’s name, do we need to show amount paid by my father in our ITR/ records? Or same can be considered as gift from Father to Son to buy property?

Reply

ramakrishna April 26, 2015 at 6:50 pm

Dear Sir,
I want to give the amount received from selling a residential plot which is a joint property (myself and wife) to my son who is residing in US after paying the Income Tax in India for the above amount received . Pl. suggest how to send it by way of gift or otherwise. If sent as gift after paying Income tax here will it be taxable in US and what is the maximum amount that could be sent in dollars. since the property is in joint name should I take two cheques from the buyer. pl. advise.

Reply

anand April 29, 2015 at 7:08 am

Can a NRI son in law give money to his father in law to buy a property. The father in law don’t have any money from his side in this property transaction. Will the money from NRI son in law will be taxable? How much money he can send?

Reply

Rashi May 3, 2015 at 12:57 am

hi, I am an nri. I want to gift my property to my niece who is also an nri property worth is of rs. 2100000/- . Can u pls say will I have to pay any tax Amount or it’s not applicable

Reply

Puneet Gupta May 6, 2015 at 10:02 am

in case i am recieving a cheque of 50000 rupees as a gift that will be exempyed in my hands. I want to register a gift deed between me and the person giving it, so of what amount of stamp paper will be required on which i can register the deed

Reply

ankit May 12, 2015 at 8:11 am

Hi,
If i receive money from my brother who is an NRI(amount 3 lakhs) & invest that within a month to buy property, if i sell that property after 3 years are there any additional tax liabilities apart from short term gains?

thanks for revert.

Reply

amit mukherjee May 13, 2015 at 9:39 am

hello,
i am swapna mukherjee.if my brother in law gift me some property valued about 6,77,000.Then what will be the tax and stamp duty fees.how much it will be…I need to know hurry..what is the percentage of tax and staming.

Reply

Hemant Kumar May 23, 2015 at 7:33 pm

I want to gift Rs Five lakhs to my daughter in law , is there any gift tax for any of us. Both r pan card holders ,
Is there any clubbing of tax

Reply

Manikaran Singal May 24, 2015 at 1:17 pm

Though this transaction will be out of purview of gift tax as father in law can gift any amount to daughter in law. But yes, this do attract clubbing and whatever your daughter in law earns out of that money if she invest it somewhere then that earning will be clubbed in your income and taxed accordingly.

Reply

Dinesh June 4, 2015 at 9:00 am

Sir,
My friend an NRI is sponsoring fees for my daughter’s NRI Quota admission in India. Should it be taxable for my daughter or me? My daughter is major.

Reply

Geetha June 5, 2015 at 9:00 pm

i sold a property. With the amount which I got can I buy a property on my daughter’s name and gift it to her? Will it attract any tax like capital gains for me or my daughter

Reply

Manikaran singal June 6, 2015 at 8:40 pm

Your selling of property will surely attract capital gain tax, but the txn of gifting of the to your daughter for buying property or buying it in her name will not attract any tax as it will b treated as gift.
it would b wise if u buy property in ur name which will help u in saving capital gain tax on property ( if long term) and bequeath this property through WILL. Though u can also gift ur proprty to ur daughter but in that case also some costs like stamp duty etc. are involved

Reply

dinesh June 6, 2015 at 5:48 pm

my friend an NRI is sponsoring tution fee of my daughter for NRI Quota admission.my daughter is major and indian resident. Is she or I have any tax liability.

Reply

SHanmuk July 14, 2015 at 2:11 am

Is there ay limit on the frequency or amount of cash gifts to my father’s sister. I am ex-Indian living in USA and my aunt is in India. I want to send amounts several times a year

Reply

SG July 27, 2015 at 10:00 am

Hello
I have got a land from my brother in law (sisters husband). Now I am planning to develop the land. Would like to understand what would the taxation be if
(a) Land value – 100 (assumption)
(b) Construction cost – 150 (assumption)
(c) Sale price – 350 (assumption)

What will the profit be for me after developing assuming development completed in 1 year
Case 1: 350-150 [c-b] i.e. 200
Or
Case 2: 350-(150+100) [c-(b+a)] i.e. 100

Kindly let me know

Reply

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