Taxation of NRIs on gifts and inheritances from India

At Tax Return Wala LLP, we understand the joy of giving and receiving gifts. However, for Non-Resident Indians (NRIs), this joy comes with specific tax considerations, particularly when it involves gifts and inheritances from India. In this blog, we explore the nuances of taxation on gifts and inheritances, shedding light on the regulations that NRIs should be aware of.

The income that India provides typically incurs taxes. Non-resident Indians may send presents to their residing Indian family members, close companions, etc. By the Liberalised Remittance Scheme, Non-resident Indians may get a maximum of USD 250,000 per year in remittances.

Humans, by nature, enjoy making and receiving presents. If you are a Non-Resident Indian (NRI), giving or getting presents comes with particular tax regulations. By the Income Tax Department of the country, the majority of gifts given to foreigners are subject to tax. Rules might vary among relatives, close companions, etc. Continue scrolling to find out more about gift taxes in India for non-resident Indians.

Gift Tax Regulations for Non-Resident Indians:

As an NRI, understanding the tax implications of gifts is crucial. Here are key regulations to keep in mind:

  • Liberalized Remittance Scheme:

NRIs can receive a maximum of USD 250,000 per year through the Liberalised Remittance Scheme for remittances.

  • Real Estate Transactions:

An RI (Resident Indian) can donate real estate to an NRI, but remittance from sales proceeds should not exceed USD 1 million per year.

  • Stocks and Bonds:

NRIs can receive gifts in the form of stocks and bonds from family members, not exceeding five percent of the Paid-up Capital.

  • Cash Gifts:

Cash gifts over 2 lakh Indian rupees incur a penalty and should be received through bank transfers, payments, or cheques.

  • Exempt Gifts:

Wedding/Marriage gifts or bequests are exempt from gift taxes, regardless of familial connections.

  • NRO Accounts:

RI can pay NRIs using their NRO accounts.

Gifts from NRI to Indian Residents:

  • Gifts to RI relatives are tax-exempt.
  • Gifts to RI friends or acquaintances are tax-exempt up to INR 50,000.
  • Gifts exceeding INR 50,000 are taxable and added to the recipient’s total income.

Gifts from Resident Indian to NRI:

  • Gifts to NRI friends or acquaintances are tax-exempt up to INR 50,000.
  • Gifts exceeding INR 50,000 are taxable, added to the recipient’s income, and assessed per their tax bracket.

Taxation of Income from India:

  • Every dollar/money received from India is subject to taxation, excluding inheritance or marriage-related taxes.
  • Verify tax regulations before sending or receiving gifts from NRIs.

According to Section 17 of the Registration Act of 1908, gifting to an NRI requires signing a gift deed. The NRI gift deed comprises two parties, the person who makes the donation (also known as the giver) as well as the person who receives the present. The legal document must be written on paper that is stamped, and the parties have to sign every single page of it.

Every dollar you get from India is taxed to a certain extent. You might be responsible for paying taxes if you obtain money from a non-resident Indian, except inheritance or marriage-related taxes. Double-check the tax regulations before sending or receiving gifts from Non-resident Indians.

Need More Tax Clarity?

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Navigating the taxation landscape for NRIs on gifts and inheritances requires a nuanced understanding of the regulations. At Tax Return Wala LLP, we stand ready to assist you in ensuring compliance and making informed decisions. Explore more on our website or reach out for personalized tax advice.