We love getting gifts. Gifts might involve a lot of emotion and tradition. But we have to consider practical and mundane things like rules and taxation when it comes to gifts in terms of cash or assets.

NRIs can give and receive gifts in cash or kind (jewelry, antiques, property) to and from relatives and non-relatives in India. Check NRI Gift rules & exemption limits…

NRI Gift Tax India

Let us look at the tax implications of gifting for NRIs but first check basic definitions which will help you in understanding the rules & other issues.

Definition

The Income Tax Act defines gift as any asset received without consideration like money or money’s worth. It can include cash, movable property, immovable property, jewelry etc.

Relatives and Non-relatives

The treatment of gift tax is different when given to relatives and when given to non-relatives. The following people are considered relatives –

All other persons are considered non-relatives.

NRI Gift Rules 

• Immovable property can be gifted to an NRI provided the remittance of sales proceeds does not exceed USD 1,000,000 per year.
• NRIs can get gifts from relatives in the form of shares and securities provided the gift does not exceed 5% of paid up capital of the company; the sectoral cap is not breached and the NRI is eligible to hold the securities.
• Gift received from a specified trust, specified fund or as a scholarship from educational institutions is not taxable.
• If the gift is an immovable property outside of India, it is exempt from tax.
• The value of the gift cannot be considered as deduction while calculating income tax.
• Income received from a gift in India is taxable in India whether the receiver and giver are Resident Indians or NRIs.
• When you receive a gift, make sure the necessary documentation is in place.
• Cash gifts that exceed Rs. 2,00,000 can be subject to penalty. Ensure that you get the relevant gift through cheques or bank account transfers.

Gift by NRI to Resident Indian

NRI gift to Resident Indian – Let us look at the different scenarios when an NRI gifts a Resident Indian –

• Gift from NRI Relative are exempted from tax – When an NRI gives a gift in the form of cash, cheque, items or property to a Resident Indian who is a relative, both giver and receiver are exempt from tax in India.
• When an NRI gives a gift in the form of cash, cheque, items or property that is within the value of Rs. 50,000 to a Resident Indian who is not a relative, both giver and receiver are exempt from tax in India.
• When an NRI gives a gift in the form of cash, cheque, items or property that exceeds the value of Rs. 50,000 to a Resident Indian who is a non-relative, gift tax is payable by the receiver. The amount is added to the receiver’s income and taxed as per the income tax slab applicable to the receiver.
• When an NRI gives a gift in the form of cash, cheque, items or property to a Resident Indian for marriage or through will, both giver and receiver are exempt from tax in India irrespective of the ‘relative’ status.

Gift to NRI by Resident Indian

Resident Indian gives a gift to an NRI – Let us look at the different scenarios when an NRI receives a gift from a Resident Indian –

• Gift to NRI Relative are exempted from tax – When a resident Indian gives a gift in the form of cash, cheque, items or property to an NRI who is a relative, both giver and receiver are exempt from tax in India.
• When a resident Indian gives a gift in the form of cash, cheque, items or property that is within the value of Rs. 50,000 to an NRI who is not a relative, both giver and receiver are exempt from tax in India.
• When a resident Indian gives a gift in the form of cash, cheque, items or property that exceeds the value of Rs. 50,000 to an NRI, who is a non-relative, the gift tax is payable by the receiver. The amount is added to the receiver’s income and taxed as per the income tax slab applicable to the receiver. The maximum limit for such a gift is USD 250,000 in one financial year. [This limit is defined under LRS (Liberalised Remittance Scheme) – the total amount of foreign exchange purchased from or remitted through, all sources in India.]
• When a resident Indian gives a gift in the form of cash, cheque, items or property to an NRI for marriage or through will, both giver and receiver are exempt from tax in India irrespective of the ‘relative’ status.
• When a resident Indian gives a gift in the form of shares or securities of an Indian company, the total value cannot exceed USD 50,000 in one financial year. The gift should follow the regulations of RBI regarding NRIs holding stock in Indian companies.

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When you give a gift or get a gift, make sure you understand the rules regarding gifts and the tax implications and act accordingly.

wiseNRI

The information that I shared in the above post is one part of the story – issues can be complex based on your resident status. If we talk about USA – you can gift up to $15,000 in a year. This is not that simple but just an example. So check rules in countries where you are staying.

Please share any additional information or experience that you have about a gift to NRI or gift from NRI – that will really help all readers. If you have any questions related to NRI gift tax – feel free to add in the comment section.

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