NRI Gift Tax India: Rules for Tax On Gift Money In India

Understanding NRI Gift Taxation in India

Most of us cherish giving and receiving gifts. However, this gesture has particular tax implications for Non-Resident Indians (NRIs). The Income Tax Department of India has specified that the majority of gifts involving NRIs are subject to taxation. The regulations differ depending on whether the recipient is a relative, friend, or acquaintance. However, NRIs are permitted to receive gifts of up to USD 250,000 per financial year under the Liberalised Remittance Scheme without incurring tax liabilities.

Rules Governing Gift Taxation In India

Here are the guidelines for NRI gifting:

Monetary gifts sent to NRIs by Resident Indians (RIs) can be deposited into their NRO accounts.
RIs can gift immovable property to NRIs, subject to the remittance of sales proceeds not exceeding USD 1 million annually.
NRIs can receive shares and securities as gifts from their relatives; the value shouldn't be more than five percent of the paid-up capital of the company.
To avoid penalties, gifts with a value of more than INR 2 lakh must be received via bank transfers as cheques or remittances.
Gift tax does not apply to inheritances or wedding presents, irrespective of the recipient's relationship.
Immovable properties gifted to RIs outside of India are tax-free in India, but subjected to tax laws of the residential country.

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Gifts From An NRI to A Resident Indian

Gifts from NRIs to RI relatives are exempt from taxes.
Gifts from NRIs to RI friends or acquaintances are tax-exempt if their value does not exceed INR 50,000.
Income from gifts by NRIs to RI friends or acquaintances is taxable if the value exceeds INR 50,000. The amount is added to the recipient's total taxable income and taxed according to their income tax bracket.

Gifts From A Resident Indian To An NRI

Are tax-free in India
Gifts to friends or acquaintances (recipients) are exempt from tax if their value does not exceed INR 50,000.
Gifts to friends or acquaintances are taxable if their value exceeds INR 50,000. Added to the recipient's total taxable income, the amount is taxed depending on their income tax bracket. The annual limit for these kinds of gifts is USD 250,000, under the Liberalised Remittance Scheme.

Understanding The NRI Gift Deed

NRIs have to formally document their gifts through a gift deed under Section 17 of the Registration Act, 1908. Two necessary parties are included in this legal document: the beneficiary and the donor (the gift giver). Both sides must sign all pages of the gift deed, executed on a stamp paper, to legitimize the transaction. This guarantees the legality and clarity of the transfer, especially in case of assets or property as a gift.

Final Note

The income that is received in India is generally subjected to taxation, with rare exceptions. Except for gifts relating to marriage or inheritance, taxes may be imposed on income received from an NRI. Before sending or receiving gifts from nonresident individuals, it is crucial to review tax laws.

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*Disclaimer: This article is published for informational purposes only. It should not be construed that the offering is available from DBS Bank India Limited or in partnership with any of its channel partners. The purpose of this blog is to provide information, not advice. It is recommended to seek professional advice before making any investment decisions. The bank assumes no responsibility for any tax losses or other losses incurred by individuals acting on the information provided above.

The purpose of this blog is not to provide advice but to provide information. Sound professional advice should be taken before making any investment decisions. The bank will not be responsible for any tax loss/other loss suffered by a person acting on the above.