How is money gifted by Indian parents to NRI children and relatives taxed?
R.N. Das recently gifted some money to his daughter and son-in-law. While Das is living in India, his daughter and son-in-law are NRIs and living abroad currently. Both of them are also employed abroad and filing tax returns in that country.
In an email to FE Money, Das asked whether any documentation is necessary to avoid any income tax-related problems in future.
Dr Suresh Surana, Founder, RSM India (a tax consultancy firm) has answered the queries sent by Das:
Section 9(1)(viii) of the Income Tax Act, 1961 (hereinafter referred to as ‘the IT Act’) provides that any sum of money exceeding Rs. 50,000 received by a non-resident shall be income deemed to accrue or arise in India and therefore shall be taxable in accordance with the provisions of IT Act. However, since the gift has been made to relatives, the same would be exempt from tax u/s 56(2)(x) (discussed in detail in response to Query 3 below)
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Further, as per rule 37BB(3)(ii) of the Income Tax Rules, Form 15CB/ Form 15CA is required to be furnished in case of any remittance made outside India. Such furnishing of Form 15CA/ 15CB would not be required where:
Furthermore, resident taxpayers are advised to keep the documentation with the authorized dealer banks under Liberalized Remittance scheme (LRS) handy along with their bank statements. Alternatively, they can also prepare a gift deed from documentation perspective.
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