Income Tax on Gifts from NRIs and Relatives in India

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.

398 thoughts on “Income Tax on Gifts from NRIs and Relatives in India”

  1. ONE OF MY CLIENT WANTS TO REMIT RS.50000/- TO RELATIVE IN US . MY QUESTION IS
    UPTO WHAT LIMIT ONE CAN REMIT THE AMOUNT TO US
    WHETHER ON ANY TRANSFER OF FUND WHETHER WE HAVE TO ISSUE CERTIFICATE IN
    FORM 15CB

  2. My grandfather’s brother’s wife and daughter wishes to gift an immoveable property valued (as per property registration rules) to be 1.50 crores. Will I incur Gift Tax liability on this property?

  3. sir i am 28years old girl.2 years back i had shifted my city n left my job bcz my boyfriend told me to leave my job.i m not working since then.he promised me to marry.but didnt fullfilled it.2 years now he is saying he is going to marry a girl of his family choice.and now my family is also against me.he told me that he will give me 50 lakh indian ruppees to compensate what he did to me.i m middle of nowhere.my question to is what is the proper way to take money from him.so that he will not create any problem to me regarding it in future.plz guide me and what will be the tax i have to pay for it.beacuse he is not my husband or any relative.thanks

    1. There will be a tax liability in this case, as per the tax slabs.. There is no exemtion of any sort.
      However, in case, you take money in name of someone who is a senior citizen, the tax liability may slightly reduce..

      hope that helps.

  4. can a partnership firm consisting of son, husband and daughter -in- law ,
    gift a land in its name to a woman (who is the wife and mother of the above said persons).

  5. IF NRI SON GIFT CASH TO HIS FATHER WITH NOTARISED GIFT DEED.

    WILL THAT INFLOW IS TAXABLE IN HANDS OF FATHER. ?

    I PRESUME THE TAX IN STATES IS
    PAID BY SON ON SUCH AMT TRF AS THAT IS HIS INCOME.

  6. Hi,

    If I gift money to my wife and she uses it in her business and makes money, will I have to pay tax on gains/returns she makes from the investment? Basically do I need to club profit generated from investment made on money gifted to my wife with my income for tax purposes?

    Regards

    1. Yes praveen. The income generated out of your gift toyour wife will be clubbed in your income and will be taxed as per your IT slabs. So if you want to support her in her business, than rather giving gift, give money on loan.

  7. My nri son will gift me his flat and I would sell it and remit the amount in dollars to him in usa to pay for house bought thro libralised remittance scheme Introduced by rbi.
    Please advice if I am to pay cap gain tax. This course is thought to avoid tax and financial burden if. He sells and transfers money. We solicit your advice’which will very
    uch appreciated.

  8. Hi,
    My father had gifted me Rs.1,00,000. I want to invest them under various heads
    viz.( equities, PPF, LIC etc.)
    I want to know:
    1] Do my father taxable income will come down by the gifted amount(in this case Rs. 1,00,000)?
    2] Will the earnings from the investment be clubbed under my name or my Father?

    P.S. Me & my father both file IT returns and fall under different tax slabs.

    1. 1) He cannot reduce his taxable income by gifting the money to you.
      2) When you earn returns by investing this money, it will be charged to you, not him.

      1. If in this case, son invest gift amount in new property for his own , how father can get tax exemption on that amount (is there any way) ??

  9. can i gift some amount from my salary to my son ‘s bank a/c ( 20 yr old , studying in engineering, non-earning) and have a FD in his name. will interest on FD will be tax free. how much amount i can transfer each year. is there any limit. can i have demat a/c account in his name and invest in equities. will clubbing provision apply here.

    1. Whatever interest earned on FD in your son’s name will be treated as income of your son and not yours. If your Son doesn’t fall in any income tax bracket than it will not be taxed. There’s no limit on gift from father to son or vice versa.
      Even if you open d’mat account in your son’s name and earn some income out of investment, no income will be clubbed in your income

  10. Like Nisha I too have won the same contest. I don’t think it can be termed as lottery as It was not a lucky draw but based on writing skill and our articles were selected from many of the enteried submitted. I conclude this after reading last 2 paragrafhs here :http://www.caclubindia.com/articles/section-194b-7636.asp#.USTGUx36Wjk.
    Also they particularly asked us to pay “Gift Tax”. Is gift tax and tax on Gambling / Lottery not different.
    Can you please tell me more on this.

    1. Hmm, the act governing these two are different but after reading that link you sent it feels like there is more complication when the prize is based on some skill or something so I’m sorry but I can’t help you more on this.

  11. They have not given details. But have asked me to pay Rs 7500 to the Post ofice or a National Bank. First I thought it was all fraud…but now as I’m reading more, it seems fair.
    When I checked online, gift tax is for 50k and above. Don’t know which category this will come under though.
    Thanks for your help.

    1. This doesn’t fall under gift tax. It falls under Section 194B of IT Act which deals with lottery prize money and winnings etc. You can look that up if you need more info.

  12. Hi, Suppose I win a contest online which offers a gadget worth Rs. 30,000. Am I liable to pay gift tax? It’s within the limits but apparently the people are asking me to pay tax before sending the prize. Should I pay and then claim for a refund? Seems unneccessary but what if they push for it?

    1. As far as I know, anything over Rs. 10,000 is taxable and you have to pay 30% plus surcharge on it. Is that the amount they are asking you to pay?

  13. Sir,
    Can I gift Rs.2 lacs only to my son who is an NRI in US and transfer to his US account ? Are there any tax implications?? Thanks.

      1. Hi Manshu,

        If you are in India, you can only transfer funds to NRO account. Transferring funds to NRE account from India is not possible. It can only be done from accounts outside of India.

        Regards,
        Veeresh

        1. Thank you for correcting me Raj. I wasn’t aware of this and thought you can use the NRE account to transfer funds from India as well. Sorry for the error, and thanks for correcting me.

          Do you have any suggestions on how this could be achieved?

  14. Thanks for the very useful ariticle especially list of people from whom one can receive gifts tax free. One question, regarding gifting of immovable properties, you have said that “If the property is gifted for a consideration, then the actual value of the property will be taken” can you please elaborate more on this? when you say property gifted without any consideration and gifted for a consideration what exactly does it mean??

  15. Ah there it is! I was referring to this in my earlier comment on the NRI investment into direct equities.
    So, tying up the 2 posts, a nri can gift to his parents and invest in the market through them, and transfer it back to his name once he get’s back to India.
    of course the taxation on the gains from investing needs to be taken care by parents.

    Regards

  16. thanks for the article…especially the list of relatives…

    1) If My dad gifts me a certain amount, then he get tax emeption on the gift amount ??

    2) Whts the upper limit for cash gifts? do we need to preserve the gift envelopes )R need to disclose the person who has gifted us in case the taxman asks for??

    3) Can my first cousin be treated as a blood relative for Gift ( son of my dad’s real elder brother)

    1. Sameer, here are the answers to the best of my knowledge.

      1. When you get a certain gift, that’s tax free for you but doesn’t make it tax free for the person who gifted it to you. So for your dad the money is still taxable if he hasn’t already paid tax on that.

      2. Rs. 50,000 when it’s not from one of the relatives listed in the post, and there’s no upper limit as far as I understand when the gift is from a relative.

      3. No.

      Could Mani or Aashish please look at my responses and verify them as well? Thanks!

      1. @ Sameer
        1. Whatever you recieve from your dad will be tax free in your hand . There’s no question of recieving any tax exemption by your father. So manshu has replied it correctly.

        2. Manshu is right here as well. As far as documentation is concerned, one may take a letter from the person giving gift stating the amount and reason (which can be love and affection). This letter should also state the Pan no. of the concerned giver.

        3.No. but the gift given by your dad’s real elder brother will be tax free.

        1. Thanks Manshu & Manikaran for ur replies…

          When one gets shares as gift or via a WILL, what are its taxation implications?? And does the beneficiary need to hold it for 1 year to avail of long term capital gain tax exemption in case he wishes to sell any??

          1. I’m not sure how the question on getting shares as gift is different from what you have already asked? Can you elaborate that please?

            I don’t know how the capital gains is calculated in this case. Sorry.

  17. Just to add , Gift tax provisions has to be read in conjunction with the clubbing provisions which are detailed u/s 60-64 of income tax act 1961. These sections deal with the cases where tax payers make an attempt to reduce the tax liability by transferring / gifting their assets in favour of family members or by arranging their sources of income in such a manner that tax incidence falls on others, but in actual the benefit of income enjoyed by them. one needs a proper tax planning at every life stage by understanding tax provisions simultaneously. I’ve written a series of articles on tax planning at different life stages, hope it benefit the readers http://goodmoneying.com/tax-planning-2/tax-planning-tips-for-married-couple-with-kids.
    Even one article on FPGI by me also throws light on this issue http://www.fpgindia.org/2012/11/spreading-the-income-golden-rule-to-save-tax.html

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