NRI, PIO Gift Tax in India

1. Monetary Benefit

When any person receives more than Rs 50,000, without consideration, in one or more transactions in a year. Such amount is chargeable under the head income from other sources.

2. Benefits arising from Immovable property

The deemed income can arise from the following transactions:

1. When the stamp duty of the immovable property exceeds Rs 50,000 and immovable property is received without consideration, the stamp duty value shall be taxable.

2. Where immovable property is received for inadequate consideration and the difference exceeds the higher of:

   1. Rs. 50,000; or

   2. 10% of the consideration

3. Benefits arising from movable property

This applies only to specified movable properties such as shares, securities, jewellery, artworks, bullion or virtual digital assets.

• When the aggregate FMV of the property received without consideration exceeds Rs 50,000, it is taxable. 

• When the difference exceeds Rs 50,000 of property received for inadequate consideration, it becomes taxable.

Certain exemptions from tax* are given for certain events like individual’s marriage, will or inheritance, and contemplation of death.

In Income Tax Section 56(2)(x), donor or donee can be an individual, partnership firm, LLP, company, AOP, BOI, co-operative society, or artificial juridical person, whether resident or non-resident.

Regarding non-residents, only the income that is received or earned in India or considered to have been received or earned in India, is subject to tax*. This means that the source of the gift becomes crucial for tax* purposes rather than the recipient's location abroad.

Moreover, the tax* treatment of gifts to NRIs by resident Indians varies depending on whether the recipient is a relative or a non-relative.

The below table highlights the taxability status based on the gift limit in income tax:

Gifts received from NRI relatives by resident Indians are not subject to taxation in India, and this exemption applies to both the giver and the receiver.

• Gifts from NRIs (non-relatives) to resident Indians, up to ₹50,000/-, are also exempt from tax* for both the giver and the receiver. However, if the value of gifts from NRIs (non-relatives) to resident Indians exceeds ₹50,000/-, the receiver is liable to pay NRI gift tax* on the gift amount, which will be taxed based on their income tax slab.

• Gifts to resident Indians from NRIs, regardless of the relationship, on the occasion of marriage or through a will, are exempt from tax* in India for both the giver and the receiver. 

• Always maintain a record of gifts through gift deeds when sending or receiving them. Signing a gift deed and securing it can help prevent potential issues in the future.

These are some essential rules and regulations regarding NRI gift tax in India: 

• You can give an immovable property as a gift to an NRI if the sale proceeds sent abroad do not exceed USD 1 Million per year.

• NRIs can receive gifts in the form of shares and securities from relatives, provided it does not exceed 5% of the company's paid-up capital, complies with sectoral limits, and the NRI is eligible to hold such securities.

• Gifts received from specific funds, trusts, or scholarships from educational institutions are not taxable.

• Gifts in the form of immovable properties located outside India are exempt from tax*.

• The value of the gift cannot be deducted while calculating income tax.

• Any income generated from the gift in India is taxable, regardless of whether the receiver and giver are Resident Indians or NRIs.

• Ensure you have the necessary documentation when receiving a gift.

• Cash gifts exceeding ₹2,00,000/- can be subject to a penalty, so receiving such gifts through cheques or bank account transfers is advisable.

• As per the Union Budget 2023-24, any monetary gift above ₹50,000 received by a non-ordinarily resident from a resident Indian would be deemed to arise in India and taxable from April 1, 2024.

• Gifts from a Resident Indian to an NRI can only be sent to their NRO Account.

While a number of items can be gifted to NRIs by residents, international life insurance plans are financial products that can help you provide financial security to your family. Unlike other life insurance, international life insurance provides global life cover and global investment opportunities.

With the above information, it is possible to understand the tax implications of gifts given to or from Non-Resident Indians. As per India's current and applicable income tax laws, different types of gifts can be completely tax-exempt or taxed beyond a certain limit.