A gift is Money or House, Shares, Jewelry etc. that is received without any consideration, or simply an asset received without making a payment against it and is a capital asset for the Recipient. It can be in the form of cash, movable property or immovable property.

(A capital asset typically refers to anything the individual owns for personal or investment purposes.)

The person who is giving a gift is called the ‘Donor’ and the person receiving the gift is known as ‘Donee’.

The Finance Bill 2019 has imposed tax on any sum of money paid or any property situated in India, transferred by a person resident in India to a person outside India (NRI), as it would be deemed to accrue or arise in India. Also Amendments at the time of passing of Budget 2019 have specifically defined the ‘person outside India’ as non-resident or foreign company.Red Gift Box

Section 9 of the Act relates to Income deemed to accrue or arise in India. Under the Act, non –residents are taxable in India in respect of income that accrues or arises in India or is received in India or is deemed to accrue or arise in India or is deemed to be received in India. Under the existing provisions of the Act, a gift of money or property is taxed in the hands of donee, except for certain exemptions provided in clause (x) of sub-section (2) of section 56. Now amendment has been introduced in budget 2019 to ensure that such gifts made by residents to persons outside India are subjected to tax in India. For the purpose of same, a new clause is inserted in Section 9 to provide that any income arising from payment of any sum of money, or transfer of any property situated in India, by a person resident in India to a person outside India shall be deemed to accrue or arise in India.

In section 9 of the Income-tax Act, in sub-section (1), after clause (vii), the following clause shall be inserted with effect from the 1st day of April, 2020, namely:––

“(viii) income of the nature referred to in sub-clause (xviia) of clause (24) of section 2, arising from any sum of money paid, or any property situated in India transferred, on or after the 5th day of July, 2019 by a person resident in India to a person outside India.”

This means that the origin of the gift becomes important for tax purpose, instead of the destination of the gift abroad.

NRIs therefore need to consider the possibility of attracting tax on any transaction in the nature of gifts which is received in India for inadequate consideration.

Below chart depicts the status of taxability:-

 Sr no Particulars Taxability
1 Is the total value of gifts received less than Rs 50000? Not taxable
2 Did you receive Gifts on Marriage ? Not taxable
3 Did you receive Gifts from Specified Relatives? Not taxable
4 Did you receive Gifts from Other than Specified Relatives ? Not taxable if Value is < 50,000/-
5 Did you receive a Gift which is a prescribed Movable Property? Taxable if Value > Rs 50,000/- & from Other than Specified Relatives
6 Did you receive a Gift which is a prescribed immovable Property? (Land/House) Taxable if SDV > Rs 50,000/- & from Other than Specified Relatives

Note:-SDV means the value adopted or assessed or assessable by any authority of the Central / State Government for the purpose of payment of stamp duty in respect of an immovable property.

The specified relatives list in terms of Section 56 of the Income Tax Act is fairly wide. It includes brothers and sisters, and their spouses. Gifts to this category will not attract any tax. But acquaintances, friends, and other close family relations would come under the purview of the tax.

Key points to be kept in mind.

One observes the following typical transactions by NRI which may attract tax under the Act:

1. NRI receives credit in NRO/ NRE bank account from friends/relatives which may not be repayable as such persons are not covered under definition of relative.

2. NRI purchases an immovable property or shares and securities of unlisted companies at a price which may not be in accordance with prescribed rules of valuation.

NRIs have to declare all taxable Gifts while filing Income Tax Return in India. The Gift amount can be shown under the head ‘income from other sources’.

So now in these situations, the relevant article of applicable DTAA shall continue to apply for such gifts as well. This amendment will take effect from 1st April 2020 and will, accordingly, apply in relation to the assessment year 2020‐21 and subsequent assessment years.

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66 Comments

  1. Akshay Kumar says:

    I am Indian Seafarer. I want to gift land to my wife which I will buy in her name using money from my NRE Account? Can you please share if it is allowed being NRI if yes then what is the procedure?

  2. RJ says:

    Hi Chandani,

    Great article. I have a query. I am a US citizen, My cousin sister’s husband who is also a US citizen want to gift me Rs 7L from his NRO account to my NRO account in India. Would I have any tax implications?

  3. Raj says:

    Hi,

    Me and my spouse are USA Green card holders. Can my father gift money ( as wire transfer) to my Spouse without triggering a gift tax obligation for any of us?

    Thank you!

  4. Nav says:

    Hi Chandani,
    Thanks for this very informative article.

    I am an NRI and my father who is based in India wants to gift me INR20 Lacs. Can I take that in my NRE account?

    Also, do I need to disclose it anywhere while filing my IT return in India?

    Thanks
    Nav

    1. Chandani says:

      A gift received by non-resident, if it is from certain specified relatives, is not treated as income and is not chargeable to tax in the hands of the non-resident. So if a father remits a large sum of money by way of gift to his son or daughter who has settled abroad, the gift will not be taxable in India in the hands of the non-resident daughter or son. Father falls under the list of relatives and a gift from the father is not treated as income in the hands of the recipient.

      Since it is not a Taxable Gift it is not required to be disclosed in Income Tax Return

      It is advisable to prepare Gift deed for record purpose.

      1. Nav says:

        Thanks a lot for your quick reply.

        And he can directly transfer the money into my NRE account and prepare a gift deed accordingly. Also, as I understand, the gift deeds do not need to be registered necessarily. Could you please confirm?

        Thanks

  5. karthik says:

    Husband(working) and wife(homemaker) combinedly filed tax in US for seven years. Husband transferred his savings to wife’s Indian account when they return back to India. Is Husband still liable to pay tax for interest earned by his wife. Pls advise.

  6. Divya says:

    Hi
    I am an NRI having FD interest income in India in my NRE account. i want to transfer the same to my father is that possible if yes , then what are the tax implications..

  7. Shahabas says:

    Hi sir,
    I received ₹ 2,00,000 from my father who is a NRI for investment in share market. Is there is any tax implication on this transaction ?

  8. sunil advani says:

    I lives in bhopal.My Sister lives in dubai.
    She wants to transfer five lakh rupees in my bank account at bhopal.Is this amount taxable for me in india as per income tax act rules?

  9. Suresh Rajendran says:

    Good day sir,
    I am Suresh Rajendran working in merchant Navy ( seafarer ). I would like to gift 17 lakhs to my father. Then,My father planned to buy agricultural land from the money I gave along with some money from his account. How this act would affect when I file my ITR in india ?

  10. CS DR. M. GOVINDARAJAN says:

    Madam,

    One NRI at USA gave loan a sum of Rs.4 crores without interest and not prescribing the repayment period to her her brother in India. Now the FEMA authorities issued show cause notice as the amount received is in violation of FEM (Borrowing and Lending in Indian Rupees) Regulations, 2000.
    He repaid some Rs.50 lakhs and purchased two houses for his sister to the tune of Rs.80 lakhs.

    To come to an end of the case the NRI is willing to treat the loan given to her brother as gift?
    Is it possible at this time?
    Loan is given during the year 2014.
    Kindly advise.

    1. Chandani says:

      A gift received by non-resident, if it is from certain specified relatives, is not treated as income and is not chargeable to tax in the hands of the non-resident. So if a father remits a large sum of money by way of gift to his son or daughter who has settled abroad, the gift will not be taxable in India in the hands of the non-resident daughter or son. Father falls under the list of relatives and a gift from the father is not treated as income in the hands of the recipient.

      1. Sreeram says:

        one chat friend who is a british citizen has sent 150000/- Pounds in a baggage to me. I am a Indian resident citizen. At Delhi airport Customs seized f the bagge. The imposed fine of Rs 80000/- under P MLAct and handed over the currency to a foreign bank. They have undertaken the task of converting and Crediting to my indian saving hankac.The converted a mont comes to 1.5 crores indian rupee’ . Now the foreign bank that as per I M Frules I must pay 30% tax in advance. Kindly enlighten whether gift tax must be paid over and above the 30 % tax.

  11. Aemses says:

    I received a gift amount of over 5 lac INR from a non relative friend from US. Please guide me how to pay my income tax and how much is applicable on my amount?

    1. Chandani says:

      As per income tax laws, the aggregate amount shall be taxable as Income From Other Sources in the hands of individual under section 56.

      This amount needs to be included in your Computation of Total Income while calculating the Taxation liability .

      This opinion is solely expressed for your querry without any further commitment on our part.

  12. Chetna says:

    Hello
    We are 3 siblings all NRI’s with citizenship in the countries we reside. Our late father (resident/citizen of India) had gifted a plot of land in India to my eldest sister when he was alive. Now my eldest sister has decided to sell the plot to a local resident in India and will pay all due taxes in India and complete formalities to have the proceeds in her NRE account. My sister wishes to share the proceeds of the land with her two younger siblings adult children who do not have NRE accounts. Is it possible for our eldest sister to remit the amount from her NRE account to a foreign account without any restrictions?
    Thank you

  13. Narsi says:

    Hi,
    Greetings
    My questions are as follows
    1. How much money can an NRI husband transfer to resident indian wife for investment in the capital markets
    2. Can I NRI husband gift a 2 bedroom apartment in india to his resident wife
    Thanks and Regards

    2

  14. SM says:

    Hello, I am an NRI and having NRE account. My friend (non-relative) needs to transfer money (by way of foreign inward remittances or amount from another NRE account) to my NRE account. Will there be any gift tax or any other tax apply to me as a recipient (or as a sender to him)? I am aware that there is no income-tax on NRE account and also aware of general gift tax (by non-relatives if >50000) but do not know tax liability that is applicable to NRE to NRE account transfer (either via NRE or inward foreign remittance). Will appreciate your response. Thanks

  15. Vijay says:

    Hi

    Iam an NRE, and i have foll questions, please help as im finding it difficult to get clear answers in layman terms

    1. Can i Gift 2 crores each to my parents in india aged 75 and 80 ?
    2. If yes, is it taxable ? (im aware income by way of interest earned on this 2 crore cash by my indian parents will be taxable)
    3. If Gift deed needed to gift the above 2 crore cash gift ?
    4. What is the amount limit to gift my Wife on my return to India permanently ? and is gift deed needed?
    5. Will income earned by interest on this cash gift to my spouse clubbed under my tax ?
    6. Can i create a HUF and transfer some amount and if HUF account amount will also be clubbed under my tax ?
    7. and lastly, what is the best way to pay minimum tax on 11 crore amount invested in FD on my return to India?
    like out of 11 cr, 2 each can be gifted to my parents, 2 cr to my wife, 2 cr to HUF, 2 cr under my name or some other combinations ?? pls advise
    do note there is a 75K inr paid by way of insurance premiums + 4 lakhs towards school fees. hence deducting all these what will be the best spread ?

  16. Pavan Vulli says:

    I am an NRI, living in Canada, My Father wants to give me some money for the purpose of me buying a home in Canada, I have an NRO, PINS NRE account, I Will become a Citizen of Canada soon, if so will that change anything?

    1.Is there a limit to how much money my Father can give/gift me?

    2.Is it taxable to either one of us?

    Thank you so much for your help.

  17. SMishra says:

    Hello,

    I am an NRI having NRE account (A). My real brother is also an NRI having NRE account (B).
    I have following queries.

    I would like to transfer money from my NRE (A) account to my brothers NRE account (B) as a gift

    –Is it required to sign any kind of gift deed while transferring money online as a gift from NRE account A to NRE account B? Or, an email record of money transfer (sent to Bank Manager) should be sufficient?

    –Are there any limitations w.r.t amount being transferred / any taxation?

    –Any specific rules that need to be followed?

    Thank you! Regards

  18. Amber says:

    I want to give gift to My Daughter residing at US.
    She have NRO/NER A/c in India.
    What is the limit of transfer as gift to my daughter and what would be tax Implication

  19. Deepak says:

    I am NRI (Germany). If my real brother transfer money to my NRO account or (in a German bank account) are they taxable? If not, How much income is tax-free?

  20. Ved parkash Yadav says:

    My father wants to buy a land in India. i want to send him cash 0f 40 lacs through my NRO account in India . Do i need to make cash gift deed for this? Will my dad has to pax TDS on this amount ?

  21. Anoop Singh says:

    I am an NRI and If I send a sum of 5lacs to my sister in law, is that taxable on her end? How is she supposed to show that in her income, she is a homemaker.

  22. Sachin says:

    Hello,

    Me and my wife both are NRI , and have NRE bank account.
    I have transferred the money from overseas to my NRE bank account in India. Later after 1 year I have transferred 40lakh from my NRE bank account to my wifes NRE bank account .
    She had invested that amount in equity via NRE account and have some short term gains. Please advise that short term equity gain should be clubbed to my income or its purely my wifes income and should be shown in her income tax return only.

    Thanks
    Sachin

  23. vishal singh says:

    NRI- Received above 5 lac from sibling in india in saving account,under which head to show in ITR-2, althoug it is non-taxable as gift from relative.

  24. Satyashekhar says:

    If NRI quits the job and comes to India for a break but not able to go back overseas for new job due to covid in 120 days, what will be his residential position and taxability on investment this year ?

    Can he temporarily transfer / distribute in his close relative names as gift ? Then taxability ?

  25. SHEKHAR S says:

    If I give gift of say cash or shares Rs.3 lacs to my father’s sister who is senior citizen, the income earned by her will be not taxable right ?

  26. bhavesh sharma says:

    i am indian and one of my italian friend ( he is italian ( Non-Relative.) ) want to send me money as a gift – he will make deed and notery of 255000 inr please guide me about tax and rules

  27. Dolly Moga says:

    In FY 2017 my father gifted two house’s to my NRI son who pays income tax in India & same gift of house’s was not mentioned in his ITR of AY 2018-19. Now, what to do and what are the implications/complications?
    Thanks
    Dolly Moga

  28. Hemraj Jethanandani says:

    1. NRI transfers more than Rs 50000 to his Son who is also NRI in yr 2019-2020. what are tax implications
    2. ICICI Bank is refusing my Son to remit money from his NRO account received as GIFT from his Father who is also NRI. Is there any change in rules

  29. Prince Kumar says:

    Will there be any tax implications for my wife if I transfer money to her savings bank account in India in which she is already running Sip in mutual funds. Though me and my wife are NRI.DOES she also need to open NRE ACCOUNT in India?

  30. Avantika Rastogi says:

    I am an NRI ,Can I transfer funds to my wife’s savings account in India (wife is also NRI) . Also she is running some SIP from that account, Will there be any tax implications for me or for her in India?

  31. Neela says:

    I’m an NRI (US citizen). If my father in India gives me a cash gift (in rupees), is it taxable?
    If the gift is invested in NRO FDs, what would be my tax rate?
    If I inherited this money, would that attract tax? Thank you.

  32. PremR says:

    Im a NRI and my in-laws are planning to buy and they are short of money . so im planning to send 40Lacs money to my in-laws indian account directly. Will this be considered as taxable are per law or will this be problem . Please help to clarify

  33. Abhijit says:

    Hi,
    I am planning to book a flat in the name of my wife (Resident Indian) and daughter (Minor – Resident Indian). Can I transfer money directly to builder account through our joint NRO account or have to transfer money to wife’s indian account and then issue a cheque or wire transfer to builder. Please advice.

    Thanks and Regards,

    Abhijit

  34. Dimpal says:

    Mr. X had transferred Rs. 77 Lac to Foreign National as Gift lived in Dubai. Now Mr. Wants to revert this amount in his saving account. Pl give a proper solution in terms of FEMA and income tax.

  35. Padmanabh says:

    Under the new provisions of the Act, a gift of money or property is taxed in the hands of NRI donee. Please specify what are the exemptions provided in Section 56(2)(x).Please clarify if after April 1, 2020 exemptions provided in clause (x) of sub-section (2) of section 56 could be availed of in respect of gift of money or property to NRI donee.

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