Taxation of Gifts Received by NRIs from India

“NRI Receiving a Gift from India? – Know when it is tax-free, taxable, and what FEMA allows.”

For NRIs, gifts from specified relatives are generally tax-free regardless of value, while gifts from non-relatives become taxable once the aggregate value exceeds INR 50,000. Apart from income-tax implications, FEMA regulations governing remittances, property transfers, and share transfers must also be complied with. It summarizes the Indian income-tax and FEMA implications when an NRI receives a gift from a resident Indian.

Basic Tax Rule in case NRI Receiving a Gift from India

• Gift from a Specified Relative : Fully tax-free, regardless of Amount received and Whether received in cash or eligible assets. Example shown: INR 25 lakh received from a parent → Tax-free.
• Gift from a Non-Relative : Taxable if the aggregate value of gifts exceeds INR 50,000 during the financial year. Example shown: INR 25 lakh received from a friend → Taxable in India.

Who is a “Specified Relative”? : The infographic lists the following as specified relatives Spouse, Parents and grandparents, Children and grandchildren, Siblings, Spouse’s siblings, Siblings of either parent, Spouses of the above persons.

Not Usually Covered :  Friends, Most cousins and Distant relatives

Meaning of Gift :

A gift is money or an asset received without consideration (i.e., without any obligation to repay). Gifts may include Cash or bank transfers, Immovable property, Shares and securities, LLP interests and Jewellery, bullion, paintings, sculptures, artworks, etc.

FEMA Rules for NRIs Receiving Gifts

FEMA Watch-outs : Highlights several FEMA considerations:

• Gifts from Resident Indians: A resident Indian can gift up to USD 250,000 per financial year under the Liberalised Remittance Scheme (LRS). Foreign currency gifts are permitted within LRS limits. Residential and commercial properties can generally be gifted. And Agricultural land, plantation property, and farmhouses cannot be gifted to NRIs.
• LRS Limit: Money remitted abroad may utilize the donor’s Liberalised Remittance Scheme limit of USD 250,000 per financial year.
• Gifts from Other NRIs/PIOs/OCIs: No overall FEMA limit on receiving Indian assets as gifts and However, repatriation restrictions may apply later. Rupee gifts in India generally flow through the NRI’s NRO Account.
• Property Gifts: Residential and commercial properties can generally be gifted to eligible NRIs.
• Shares and Securities: Gifts of shares/securities to NRIs are subject to FEMA conditions. Certain transfers may require RBI/government approval. And Value limits and sector-specific conditions may apply. Shares and Securities: Transfer of shares/securities to an NRI may require compliance with FEMA regulations and, in certain cases, RBI approval/filings.
• Restricted Properties: Agricultural land, plantation property and farmhouses have restrictions under FEMA.

Income Tax Treatment of Gifts

• Gifts from Relatives : Fully tax-free, irrespective of Amount received, Type of asset received
• Gifts from Non-Relatives : Tax applies if the aggregate value exceeds INR 50,000 in a financial year.

Type of Gift	Taxable Amount
Cash	Entire amount becomes taxable if total gifts exceed INR 50,000
Immovable Property	Stamp Duty Value (SDV)
Shares, Securities, Jewellery, Artworks, etc.	Fair Market Value (FMV)

Taxable gifts are generally taxed under “Income from Other Sources.”

• Gifts Always Exempt from Tax : The following gifts remain tax-free even if received from non-relatives Gifts received on marriage, Gifts received under a Will and Gifts received in contemplation of the donor’s death
• Who Qualifies as a Relative (Income Tax Act) : Includes Spouse, Parents and grandparents, Children and grandchildren Brothers and sisters, Brothers/sisters of spouse, Brothers/sisters of parents, Lineal ascendants and descendants of self and spouse, Spouses of all above persons. Generally not covered Friends, Most cousins and Distant relatives
• Repatriation of Gifted Assets : When a gifted asset is sold Sale proceeds are generally credited to an NRO account. Repatriation of up to USD 1 million per financial year is generally permitted, subject to FEMA compliance.

Tax on Income Earned from Gifted Assets

• Immovable Property : Self-occupied property: generally no annual tax implication. And Let-out property: rental income is taxable in India.
• Financial Assets : Income such as Dividends, Interest on deposits, bonds, debentures, Mutual fund distributions (where taxable) is taxed according to applicable NRI tax rates.
• Clubbing Provisions : Income from assets gifted to Spouse, Minor child, Son’s wife, may be taxable in the hands of the donor instead of the recipient.

Sale of Gifted Assets

• Property : Previous owner’s holding period is included. Cost of acquisition is generally inherited from the previous owner. Sale may qualify for long-term capital gains treatment.
• Shares and Securities : Shares received from relatives are tax-free on receipt, Shares received from non-relatives may be taxable based on FMV at the time of gift. And Subsequent sale may attract capital gains tax.

How Tax is Calculated – in case of NRI Receiving a Gift from India

Gift Type	From Relative	From Non-Relative
Cash / Bank Transfer	Exempt	If total gifts exceed INR 50,000, entire taxable value considered
Immovable Property	Exempt	Tax based on Stamp Duty Value (SDV)
Shares, Securities, Jewellery, Bullion, Artworks, etc.	Exempt	Tax based on Fair Market Value (FMV)

taxable gifts are generally taxed under “Income from Other Sources.”

Documents to Maintain in case of NRI Receiving a Gift from India : NRI must keeping Gift deed, PAN / Passport / NRI or OCI proof, Proof of relationship, Bank and remittance records, Property or share valuation reports, Registration/transfer documents and RBI or bank approvals, where applicable

Key Takeaway from the NRI Receiving a Gift from India

For an NRI receiving a gift from India:

• Specified relative → Generally tax-free irrespective of amount.
• Non-relative → Taxable once the aggregate value exceeds INR 50,000.
• Property and specified movable assets are taxed based on SDV or FMV.
• FEMA compliance must also be checked, especially for overseas remittances, property transfers and transfer of shares.

• Proper documentation is essential to substantiate the gift transaction. high-value gifts involving shares, foreign remittances, or immovable property should be reviewed on a case-specific basis under the Income-tax Act, FEMA, RBI regulations, and applicable valuation rules.

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