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 atÂ firstname.lastname@example.org
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:
- Receipts on occasion of marriage of the individual
- Receipts under a will or inheritance
- 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:
- Parents siblings and their spouse
- Spouse of siblings
- Daughter and son
- Spouse of daughter and son
- Spouse’s parents
- 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:-
- If the property is gifted without any consideration then if the stamp duty value exceeds Rs. 50000/-, stamp duty value will be taken
- If the property is gifted for a consideration, then the actual value of the property will be taken
In case of other properties:
- If gifted without consideration and fair market value exceeds 50000, then the fair market value will be taken as the final value
- 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:
- he/she is NOT in India in that year for period or periods amounting in all to 182 days or more, or
- 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”
My brother who is a NRI wants to send 50 lakhs as gift to our mother.
1. Am I right in saying that as our mother is a blood relative, this amount won’t be taxed but if she invests this amount in Fixed deposit, the interest she earns from it will be taxed. Is that right?
2. As a proof document that this is a gift to our mother, can my brother just send a letter with his signature which my mother can use as a proof that his was a gift she received. Does she need to product any other document as a proof apart from a letter my bother?
3. When she declares, which section should she fill this amount (50 lakhs) in the tax form?
If I (senior citizen of India) want to gift money to my son, who is living abroad, what is the procedure? He took nationality of that country. What permissions are to be obtained? What is the upper limit? Am I required to pay any tax on the proposed gift?
Would appreciate advice on above queries. THANK YOU.
My father sold property and gifted the proceeds to 2 daughters.1st daughter repaid the housing loan and the second daughter invested the amount in constructing a house. can the daughters claim capital gains exemption. can my father would be relieved from capital gains.