In India, gifts from relatives are tax-exempt, but gifts from non-relatives above ₹50,000 are taxable in the recipient’s hands. When money moves between residents and NRIs, FEMA/LRS rules also apply (e.g., rupee gifts to NRIs must go to the NRO account and count toward the USD 250,000 LRS limit). Repatriation from NRO is capped at USD 1 million per FY with documentation. (Reserve Bank of India) (Reserve Bank of India)
Why this matters
Gifts are a common way to support family across borders, but two laws apply simultaneously:
- Income-tax Act (taxability/exemptions), and 2) FEMA/RBI (how the money or asset can legally move). Getting either wrong can cause unexpected tax, blocked transfers, or penalties.
Who counts as a “relative”?
For tax purposes (Section 56), “relative” includes spouse, parents, siblings (incl. of spouse), lineal ascendants/descendants (incl. of spouse), and spouses of these persons. Gifts from these relatives are fully exempt, regardless of amount.
For certain FEMA permissions (e.g., LRS rupee gifts), “close relative” follows Companies Act, s.2(77). (ClearTax)
Income-tax rules on gifts (applies to residents and NRIs)
1) Money gifts
- From relatives: fully exempt.
- From non-relatives: taxable if the aggregate of such gifts in a financial year exceeds ₹50,000; when it crosses ₹50,000, the entire amount becomes taxable as “Income from Other Sources”.
2) Immovable property (land/building)
- If received without consideration from a non-relative and stamp duty value (SDV) > ₹50,000, taxable amount = SDV.
- If received for inadequate consideration from a non-relative, taxable amount = SDV – consideration, if the difference exceeds ₹50,000 and 10% of consideration. Gifts from relatives are exempt.
3) Specified movable property (shares, securities, jewellery, etc.)
- Without consideration from non-relative and FMV > ₹50,000 → FMV taxable.
- For inadequate consideration → FMV – consideration taxable, subject to thresholds. Gifts from relatives are exempt.
Special rule for NRI recipients (place of receipt)
Even if money is paid outside India by a resident to a non-resident, it is deemed to accrue in India and can be taxable in India (if not covered by a gift exemption), due to Section 9(1)(viii) (effective 5-Jul-2019).
FEMA/RBI rules that change how you gift
Resident → NRI/OCI: cash & bank transfers
- A resident individual can make a rupee gift to an NRI/PIO close relative (Companies Act definition).
- The gift must be credited to the NRI’s NRO account and counts toward the resident’s USD 250,000 LRS limit for that FY. (Reserve Bank of India)
- PAN is mandatory for LRS remittances. (Reserve Bank of India)
- NRO balances are non-repatriable except as permitted below. Permissible credits include such rupee gifts/loans from resident relatives within LRS. (Reserve Bank of India)
NRI/OCI → Resident
- Inward gifts via normal banking channels are permitted; taxation depends on the recipient’s relationship and thresholds under Section 56. (Cash in India is restricted—see 2-lakh rule below.)
Repatriation from NRO (important for NRI recipients)
- NRIs/PIOs can repatriate up to USD 1,000,000 per financial year from NRO balances/sale proceeds of assets, after taxes and with Form 15CA/15CB (chartered accountant certificate). Higher amounts need RBI approval. (Reserve Bank of India, Reserve Bank of India, Income Tax Department)
Gifts of immovable property in India
- NRIs/OCIs can receive residential/commercial property by gift from a resident/NRI/OCI. Agricultural land/plantation/farmhouse is not permitted to be acquired by gift by NRI/OCI. (Reserve Bank of India)
- Sale proceeds of property acquired by gift must go to NRO; repatriation then follows the USD 1 million route. (MEA India)
Gifts of shares/securities (extra compliance)
- Gifting Indian company equity instruments between residents and non-residents is governed by FEMA NDI Rules, 2019; conditions include sectoral caps, pricing/valuation and (in some cases) caps such as 5% of paid-up capital and/or prior approval/reporting. Seek specific compliance before gifting securities. (High Court of Tripura, BCAJ)
Cash caution: ₹2 lakh rule
Regardless of residency, no person may receive ₹2,00,000 or more in cash (aggregate from one person in a day / per transaction / per occasion) due to Section 269ST; violations attract 100% penalty on the recipient. Use banking channels. (Govt notifications/circulars implement 269ST.) (India Code)
At-a-glance: Taxability matrix (India)
| Scenario | Tax in recipient’s hands (India) | FEMA/Banking must-knows |
|---|---|---|
| Resident → NRI (relative) money gift | Exempt (relative) | Make rupee gift via banking; credit to NRO; counts under resident’s USD 250k LRS limit; PAN mandatory. Repatriation later from NRO up to USD 1m/FY. (Reserve Bank of India) |
| Resident → NRI (non-relative) money gift | Taxable in India if aggregate > ₹50k; deemed to accrue in India even if paid abroad (s.9(1)(viii)). | Same as above for movement; consider LRS/TCS at bank. |
| NRI → Resident (relative) money gift | Exempt (relative) | Normal inward remittance to resident’s account; avoid cash ≥ ₹2 lakh. (India Code) |
| NRI → Resident (non-relative) money gift | Taxable if aggregate > ₹50k | Use banking channels; avoid cash ≥ ₹2 lakh. (India Code) |
| Gift of Indian residential/commercial property to NRI/OCI (from relative) | Exempt (relative) | Allowed under FEMA; agri/plantation/farmhouse not permitted; future sale proceeds go to NRO; repatriation up to USD 1m/FY. (Reserve Bank of India, MEA India) |
Worked examples (India-centric)
1.Parent in Mumbai gifts ₹20 lakh to NRI daughter in the US
- Tax: Exempt (relative). If paid abroad, still fine due to exemption; if not a relative, Section 9(1)(viii) would deem it Indian-sourced and taxable.
- FEMA: Use LRS; credit as rupee gift to daughter’s NRO (counts into the parent’s USD 250k LRS). Later, daughter may repatriate from NRO up to USD 1m/FY with 15CA/15CB. Avoid cash. (Reserve Bank of India, Income Tax Department)
2.NRI uncle gifts ₹8 lakh to resident niece in India
- Tax (recipient): Non-relative; aggregate >₹50k → entire ₹8 lakh is taxable. Use bank transfer; cash ≥₹2 lakh prohibited to receive. (India Code)
3.Resident parents gift a flat in Pune to their NRI son
- Tax: Exempt (relative).
- FEMA: Permitted (residential/commercial ok; not agricultural/plantation/farmhouse). On sale, proceeds go to NRO; repatriation within USD 1m/FY. (Reserve Bank of India, MEA India)
Documentation & compliance checklist
- Identity/relationship proofs (to support “relative” exemption).
- Mode: Banking channels only; do not receive ₹2 lakh+ in cash. (India Code)
- Resident making LRS gift: PAN, Form A2, purpose code (Gift/Donation), within USD 250,000 limit. (Reserve Bank of India)
- Credit for NRI gifts from residents: Route rupee gifts to NRO; note non-repatriable character (except via USD 1m facility). (Reserve Bank of India)
- Repatriation from NRO: Form 15CA/15CB, proof of taxes paid, supporting documents (sale deeds, bank credits, etc.). (Income Tax Department)
- Property gifts: Registered gift deed, applicable stamp duty/registration (state-specific), FEMA eligibility (no agri/plantation/farmhouse for NRI/OCI). (Reserve Bank of India)
- Securities gifts: Check NDI Rules conditions (sector caps, 5% limits, reporting/approval where needed). (High Court of Tripura, BCAJ)
Pro tips (Indian investors & families)
- Plan the route, not just the tax. An exempt gift can still get stuck if you credit the wrong account (e.g., try to put a resident’s rupee gift into NRE instead of NRO). (Reserve Bank of India)
- Budget for repatriation timing. If future outbound transfer is crucial, remember the USD 1m/FY ceiling from NRO for capital funds. (Reserve Bank of India)
- Mind LRS/TCS at the bank counter. Outward LRS remittances by residents may attract TCS beyond notified thresholds/rates—these have been tweaked recently; check the latest CBDT/PIB updates or your bank before executing. (Press Information Bureau, Income Tax India)
FAQs
Is a gift received by an NRI outside India taxable in India?
If the donor is a resident and the gift is money (and not otherwise exempt), Section 9(1)(viii) deems it to accrue in India—so Indian tax can apply even if paid abroad. Gifts from relatives remain exempt.
How much can an NRI remit out of India if they later need the gifted money abroad?
From NRO, up to USD 1,000,000 per FY (capital funds), post-tax and with 15CA/15CB. Current income is freely repatriable. (Reserve Bank of India, Reserve Bank of India)
Can parents in India gift USD directly to an NRI child’s foreign account?
Yes under LRS (purpose “Gift/Donation”) within USD 250,000/FY per resident donor; PAN required. (Rupee gifts to NRI relatives must be credited to NRO.) (Reserve Bank of India)
Can an NRI/OCI be gifted agricultural land in India?
No. NRI/OCI can’t acquire agricultural/plantation/farmhouse by gift; residential/commercial is permitted. (Reserve Bank of India)
Key takeaways
- Tax first, then FEMA: Confirm Section 56 exemption or taxation, then ensure the FEMA path (LRS/NRO/NRE) is correct.
- Resident→NRI gifts are often routed to NRO and count toward the resident’s USD 250k LRS. (Reserve Bank of India)
- Repatriation from NRO is possible up to USD 1m/FY with documentation. (Reserve Bank of India)
- Avoid cash ≥ ₹2 lakh—use banking channels. (India Code)
Sources: Income Tax Dept tutorials & FAQs; RBI FAQs on LRS, NRO/NRE accounts, Remittance of Assets; FEMA NDI Rules (2019). (Reserve Bank of India, Reserve Bank of India, High Court of Tripura)