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T5: GIFTS TO AND FROM NRI – TAXABILITY

Taxation of Gifts Involving NRIs

From a taxation perspective in India, any money or property received without consideration or with inadequate consideration can be considered a gift and taxed in the hands of the recipient. If the recipient is an NRI, the amount received is classified as ‘Income from Other Sources.’ If the aggregate value of such gifts received during the year exceeds ₹50,000, the entire amount is taxable.

Exceptions to Gift Taxability

Certain gifts are exempt from tax. Key examples for individuals include:

  1. Gifts from Relatives: Defined as:

    • Spouse of the individual.

    • Brother or sister of the individual.

    • Brother or sister of the spouse of the individual.

    • Brother or sister of either of the parents of the individual.

    • Any lineal ascendant or descendant of the individual.

    • Any lineal ascendant or descendant of the spouse of the individual.

    • Spouse of the persons referred to in (b) to (f).

  2. Gifts on the Occasion of Marriage:

    • Money received on the occasion of the individual’s marriage.

  3. Gifts Under Will/Inheritance:

    • Money received under a will or by way of inheritance.

Taxation of Property

  • Immovable Property: The excess of the stamp duty value over the purchase price is treated as the income of the purchaser.

  • Movable Property: Only prescribed movable property are covered for gift tax, namely shares/securities, jewelry, archaeological collections, drawings, paintings, sculptures, any work of art, and bullion. Other items such as laptops and TVs are excluded.

Taxation of Gifts from Indian Residents to NRIs

The Finance Act of 2019 made gifts given by Indian Residents to NRIs taxable in India, effective from July 5, 2019. These gifts are deemed to accrue or arise in India as per Section 9 of the Income-tax Act.

Taxation of Gifts Given by NRIs to Residents in India

  • Gifts to Relatives: Both the giver (NRI) and the receiver (resident relative) are exempt from tax in India.

  • Gifts to Non-Relatives: If the amount exceeds ₹50,000, the receiver must include the amount as taxable income.

For more detailed information and examples, you can refer to the Income Tax of India webisite.

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