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Everything You Need to Know About NRI Gift Tax in India

Income from different sources may or may not be taxable under India's applicable income tax laws. This can include salaried income, business income, income from the sale of a property, rental income, etc. Additionally, the taxation will also be determined based on your residential status.
 

However, did you know that gifts presented to resident Indians by a Non-Resident Indian (NRI) can also be taxed? And does the gift tax in India apply to residents when they present a gift to an NRI?
 

Through this blog, let us learn more about gifts' taxability and the gift tax for a foreign recipient.

What is an NRI Gift Deed?

In April 1958, the Government of India introduced the Gift Tax, which is governed by the Gift Act of 1958 (GTA). The purpose of this tax is to levy taxes on the giving and receiving of gifts in certain specified circumstances.
 

An NRI gift deed is a legal document required under Section 17 of the Registration Act of 1908. It is formulated when an NRI donor wants to give a gift to someone.
 

The gift deed is a formal agreement between the donor and the receiver and must be printed on stamp paper. Both parties must sign all the pages of the gift deed.

Taxation of Gifts by Resident Indians to NRIs

Regarding non-residents, only the income that is received or earned in India, or considered to have been received or earned in India, is subject to tax. This means that the source of the gift becomes crucial for tax purposes rather than the recipient's location abroad.
 

Moreover, the tax treatment of gifts to NRIs by resident Indians varies depending on whether the recipient is a relative or a non-relative.
 

The below table highlights the taxability status based on the gift limit in income tax:
 

Items

Taxability

Money (cash, cheque, draft)

Taxable if the value of the gift is greater than ₹50,000

If the value of the gifts is up to ₹50000

Not taxable

Property/money on the occasion of marriage

Not taxable

Gifts from specified relatives

Not taxable

Gifts from someone who is not a specified relative

If the value of the gift is up to ₹50,000/-, it is not subject to taxes.

Immovable property (land/house) received as a gift

If the value of a gift is more than ₹50,000/- and it is received from someone who is not a specified relative, then it is subject to taxes.

Shares and securities given as gifts

The total value should not be above ₹50,000/- in any financial year

Taxation of Gifts from NRIs to Resident Indians

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. However, if the value of gifts from NRIs (non-relatives) to resident Indians exceeds ₹50,000/-, the receiver is liable to pay NRI gift tax on the gift amount, which will be taxed based on their income tax slab.

  • Gifts to resident Indians from NRIs, regardless of the relationship, on the occasion of marriage or through a will, are exempt from tax in India for both the giver and the receiver. 

  • Always maintain a record of gifts through gift deeds when sending or receiving them. Signing a gift deed and securing it can help prevent potential issues in the future.

NRI Gift Tax Rules in India

These are some essential rules and regulations regarding NRI gift tax in India: 
 

  • You can give an immovable property as a gift to an NRI if the sale proceeds sent abroad do not exceed USD 1 Million per year.

  • NRIs can receive gifts in the form of shares and securities from relatives, provided it does not exceed 5% of the company's paid-up capital, complies with sectoral limits, and the NRI is eligible to hold such securities.

  • Gifts received from specific funds, trusts, or scholarships from educational institutions are not taxable.

  • Gifts in the form of immovable properties located outside India are exempt from tax.

  • The value of the gift cannot be deducted while calculating income tax.

  • Any income generated from the gift in India is taxable, regardless of whether the receiver and giver are Resident Indians or NRIs.

  • Ensure you have the necessary documentation when receiving a gift.

  • Cash gifts exceeding ₹2,00,000/- can be subject to a penalty, so receiving such gifts through cheques or bank account transfers is advisable.

  • As per the Union Budget 2023-24, any monetary gift above ₹50,000 received by a non-ordinarily resident from a resident Indian would be deemed to arise in India and taxable from April 1, 2024.

  • Gifts from a Resident Indian to an NRI can only be sent to their NRO Account.

While a number of items can be gifted to NRIs by residents or vice-versa, NRI insurance plans are financial products that can help you provide financial security to your family. The tax treatment of life insurance policies for NRIs is similar to that of resident Indians, provided the NRI has a PAN card.
 

However, if the tax proceeds from your NRI insurance policy exceed a certain limit, this amount will be taxable. But it is important to note that a life insurance policy can help you secure your family in India and offer them a death benefit in the event of your untimely demise. With a Tata AIA insurance policy, you can choose from different NRI life insurance plans that can cater to your different insurance needs.

Conclusion

With the above information, it is possible to understand the tax implications of gifts given to or from Non-Resident Indians. As per India's current and applicable income tax laws, different types of gifts can be completely tax-exempt or taxed beyond a certain limit.

Your Life, Your Legacy: Life Insurance Inquiry for Indians Abroad

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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

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Frequently Asked Questions

Can NRI send money to parents in India?

US-based NRIs can transfer funds directly to their parents' bank account. But if the NRI is a joint account holder, the money will not be considered a gift.

Do you have to pay customs duty on gifts in India?

As per the new foreign trade policy, goods imported as gifts with complete payment of the applicable duties are allowed. Gifts such as Rakhi’s and life-saving drugs will not attract any customs duty.

Disclaimer

  • Insurance cover is available under the product.

  • The products are underwritten by Tata AIA Life Insurance Company Ltd.

  • The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.

  • For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale.

  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.

  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.

  • Tax: *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.