NRI Gift Tax Guide: Understanding Tax Implications in India (2024)

FAQs

Is gift received from NRI taxable in India? ›

Gifts received from NRI relatives by resident Indians are not subject to taxation in India, and this exemption applies to both the giver and the receiver. Gifts from NRIs (non-relatives) to resident Indians, up to ₹50,000/-, are also exempt from tax for both the giver and the receiver.

Here's how a gift is treated for tax if a resident Indian receives it from an NRI: If the gift amount exceeds ₹50,000, the entire amount becomes taxable for the recipient under the income category Income from Other Sources.

Gifts Exempted from Tax

1) Gifts or cash of up to Rs. 50,000 in a financial year are exempt from tax. However, if you receive gifts higher than this amount, the entire gift becomes taxable.

An NRI is taxed at 20% when he invests in certain assets in India. All the more, he/she is not required to file an income tax return if his/her income comprises only special investment income and TDS on the same has been deducted.

Annual Exclusion Limit for Gift Tax

This annual exclusion limit of $17,000 is per person and recipient. For example, you can send $17,000 to your mother, $17,000 to your cousin, $17,000 to your friend and $17,000 to your neighbour in India in 2023 without having to file a gift tax return in 2024.

However, if an NRI transfers money to someone not related by blood, then there is a tax aspect. Any amount over Rs 50,000 in a year is taxable.

Who can receive tax-free foreign remittances in India? According to the Foreign Exchange Management Act (FEMA), taxes are not applicable if you send money to your children, spouse, parents, siblings, linear descendants or ascendants and siblings of your spouse.

How much money can be sent as a gift to the USA from India? The Liberalised Remittance Scheme (LRS) is open to all Indian resident individuals, enabling them to send a maximum of $250,000 per fiscal year.

If your mother gifts you one crore rupees in a single financial year (April 1st to March 31st), it will be taxable as it exceeds the Rs. 50,000 exemption limit. However, if she spreads the gift across multiple financial years, and each installment is less than Rs. 50,000, it will be considered exempt from tax.

Bank transfers (including cash)

As per FEMA, there is no upper limit to the transaction value. Permitted from relatives only. Rupee gifts are not permitted to be credited to Non-Resident Ordinary (NRO) accounts.

Can NRI send money to spouse in India? ›

It is perfectly legal to send money to your wife in India but the nature of transfer from your account to that of your wife needs to be determined—whether it is given as loan or gift or income, as there are different FEMA (Foreign Exchange Management Act) rules for each type of transaction.

Annual gift tax exclusion

The gift tax limit is $17,000 in 2023 and $18,000 in 2024. Note that this annual exclusion is per gift recipient.

NRIs are mainly Indian citizens residing abroad and persons of Indian origin who visit India for less than 182 days in the whole financial year. But as per new income tax rules, the government reduced the tenure from 182 days to 120 days for all those NRIs whose annual income exceeds Rs 15 Lakhs.

When NRIs invest in certain Indian assets, they are taxed at 20% on the income earned. If the special investment income is the only income the NRI has during the financial year and TDS has been deducted, then such an NRI is not required to file an income tax return.

Filing Income Tax Return (ITR) for NRIs

NRIs are required to file an income tax return in India if their taxable income in India during the financial year exceeds the basic exemption limit of INR 2.5 lakhs. The due date for filing the return is usually July 31 of the assessment year.

In short, if you receive a gift or bequest from a foreign person, and those funds or assets were held abroad, you likely won't owe taxes on that gift. However, it is essential to comply with reporting requirements by filing Form 3520 in a timely manner in order to avoid penalties and ensure compliance with IRS rules.

Understanding tax implications on remittance to India

As an NRI, you are not subject to taxation on the money you send to India. However, sending money to India from overseas will have tax implications for the recipient who is a resident of India. This will depend on the purpose of the remittance.

Customs Duties

In most countries, if the gift is over a certain value it is taxable, and India is not exception. The non-taxable amount varies greatly from country to country and is subject to change any time (ironic but true, this can happen even after you ship the gift to the recipient).

"Any income earned by NRI that is received or deemed to be received in India or accruing or deemed to accrue or arise in India is taxable in India.