The Income Tax Act defines a gift as any asset received without consideration or against inadequate consideration like money or money’s worth. It can be in the form of cash, movable property, or immovable property. In the below article, we will understand how giving or receiving these items as gift to NRI by resident Indian or vice-versa can bring in tax implications and who has to bear them.
- The movable property shall also include shares, securities, jewelry, archaeological collection, drawing, painting, any work of art, bullion, vehicles, etc.
- Immovable property shall include land or building or both (it does not include agricultural land in rural areas)
Taxability on Gifts to NRI by Resident Indian
- For non-residents, only the income which is received or accrued or which is deemed to have been received or accrued in India is taxable in India. This means that the origin of the gift becomes important for tax purposes, instead of the destination of the gift abroad.
- Further, the treatment of tax on gift to NRI by resident Indian shall depend on gifts to relatives and non-relatives.
- The below chart depicts the status of taxability:-
|1.||Money (cash, cheque, draft)||If money > 50,000; whole amount taxable|
|2||Value of gifts received less than INR 50000||Not taxable|
|3||Property/money on the occasion of marriage||Completely exempt irrespective of the value|
|4||Gifts from Specified Relatives||Not taxable|
|5||Gifts from Other than Specified Relatives||Not taxable if Value is < 50,000/-|
|6||Movable Property received as a gift.||Taxable if Value > Rs 50,000/- & received from other than Specified Relatives|
|7||Immovable Property (Land/House) received as a gift||Taxable if Stamp Duty Value > Rs 50,000/- & received from other than Specified Relatives|
|8||Gifts in the form of shares and securities||The total value can’t exceed INR 50,000/- in one financial year|
- The gift would be taxable if it is in the nature of capital assets in the hands of the recipient. However, any gifts in the nature of stock, raw materials, or consumables that can be used by the recipient in his/her business operation, will not be considered as a capital asset and thus will not be taxable.
- NRIs have to declare all the taxable gifts while filing Income Tax Returns in India.
- The gift would be chargeable to tax under the head “Income from other sources” and at normal slab rates.
Exemption of Gifts
Under the following situations, receipt of gifts shall be non-taxable in hands of recipient irrespective of monetary value:
- Gift received :
- from relatives*
- On the occasion of the marriage,
- Under a will or by way of inheritance.
- In contemplation of death of the payer.
- From local authority.
- A fund, foundation, university, other educational institution, or other medical institution, hospitals, or any trust or institution defined in Section 10(23C), any trust or institution registered under section 12AA.
- Further, these exceptions would be applicable even in the context of gift to NRI by resident Indian.
Relative*: Given below is a list of people considered as relatives under the tax regulations:
- Spouse of the individual
- Brother and sister (including their respective spouses) of both individual and his/her spouse
- Brother and Sister (including their respective spouse) of an individual’s father and mother
- any lineal ascendant or descendant (including their respective spouses) of the individual
- any lineal ascendant or descendant (including their respective spouses) of the spouse of the individual
- Everyone else is simply considered as a non-relative.
A Gift to a Resident Indian by NRI
- Gift received from NRI relative to a resident Indian is exempt from tax in India for both giver and receiver
- Gifts to Resident Indians from NRIs (non-relative) within INR 50,000/- are exempt from tax for both giver and receiver
- On gifts to Resident Indians from NRIs (non-relative) exceeding INR 50,000/-, receiver shall be liable to pay tax on the gift. (This shall be taxable as per their income tax slab)
- Gifts to Resident Indians from NRIs (irrespective of relation) on the occasion of marriage or through a will is exempted from tax in India for both giver and receiver
Another very important aspect while sending or receiving gifts is keeping a record of the same through gift deeds. Furthermore signing a gift deed and keeping them safe can help you to avoid major issues in the future.
As per Section 56(2), any sum received from relatives is exempt from tax. So, if this amount is received as gift from a father, it will be exempt in her hand. Further, as per Section 64, income generated from this gifted amount will be clubbed in her income and she will be required to pay tax and file the return in India if her gross total income exceeds the minimum exemption limit of INR 2,50,000.
While gifts received by any person above INR 50,000 are taxable, there are special exemptions for gifts to some specific relatives like children and parents. However there is no limit on the amount that can be gifted.
Gifts from Resident Indians to NRIs in the form of shares and securities of an Indian Company, the total value can’t exceed INR 50,000/- in one financial year. Further, the gift should follow the regulations of RBI