Giving gifts has long been a common way to celebrate milestones, and strengthen relationships. However, there may be taxes to consider when those gifts include substantial amounts of cash or real estate, especially for NRIs.
This blog breaks down the Indian gift tax rules as they apply to NRIs, including who qualifies as a “relative,” what limits apply, and how to stay compliant under Income Tax regulations.
Are Gifts Received by NRIs in India Taxable?
Understanding Who an NRI is under Indian Tax Law
An individual’s status as an NRI is given by Section 6 of the Income Tax Act. NRI status is determined by the number of days a person spends in India over a financial year or multiple financial years.
You check your status using Belong's NRI Residential Status Calculator.
What Qualifies as a ‘Gift’ under Indian Income Tax Rules?
Under Indian tax law, a “gift” is defined as any money or asset received without consideration. This covers cash transfers, immovable property, shares/securities, jewellery, artwork, etc. Most gifts from relatives or on special occasions (marriage, inheritance) are fully exempt.
Does the Source of the Gift Matter for NRIs? (Resident vs Non-Resident)
For tax purposes, it does not matter whether the donor is a resident Indian or another NRI - what matters is whether the donor is a “relative”, and if the gift value exceeds the ₹50k threshold. Both resident and non-resident donors are subject to the same Section 56(2) rules. However, under FEMA, source matters: a resident Indian can remit gifts to an NRI only up to US$250,000 per year under LRS, whereas there is no limit on gifts from one NRI/OCI to another.
Tax-Free Gifts for NRIs: When Are Gifts Not Taxable?
Gifts from Relatives: Exemptions and Limits
Gifts received from specified relatives are entirely exempt, regardless of amount. The Income Tax Act’s definition of “relative” for gifts is very broad: it includes a person’s spouse, brothers, sisters, lineal ascendants (parents, grandparents, etc.) and descendants (children, grandchildren), as well as the spouses of all of these individuals.
Here are some of the individuals considered are:
Spouses, parents, children, siblings (and their spouses) are relatives.
Grandparents, grandchildren (and their spouses) also qualify as relatives.
Even in-laws (e.g. siblings of spouse, their spouse) count.
Since gifts from any of these persons are wholly exempt, an NRI who gets a large sum or property from a parent, spouse, brother/sister, or other lineal relative owes no tax. There is no monetary limit for relative gifts - the ₹50k threshold only applies to gifts from non-relatives.
Gifts on Occasions Like Marriage or Inheritance
Certain occasions allow tax-free gifts even from non-relatives. Under Sec 56, any gift received (from anyone) on the occasion of your marriage is fully exempt. Likewise, gifts received under a will or inheritance or made “in contemplation of death” are not taxed. In other words, an NRI who is gifted any sum or asset for his wedding, or who inherits assets on someone’s death, will not pay income tax on those gifts regardless of value. These exemptions reflect that such transfers are seen as life-event transfers rather than “income.”
How much Value of Gift is Tax free?
The ₹50,000 threshold is crucial. Aggregate gifts from non-relatives under ₹50k in a financial year are not taxable. This threshold applies separately to different categories of gifts: cash, property and shares. It is also irrelevant whether the donor is resident or foreign - it only matters that the donor is not a “relative”.
Taxable Gifts for NRIs: When Do You Pay Tax?
Gifts from Non-Relatives Over ₹50,000 in Value
Any gift from a non-relative (resident or foreign) exceeding ₹50,000 in value triggers tax. Under Sec 56(2), such gifts are added to the receiver’s income and taxed at his slab rate. This applies to money (cash, cheque, bank transfer) as well as property or assets. For example, if an NRI receives ₹75,000 cash from a family friend (non-relative), the full ₹75,000 is taxable. If multiple gifts are received from different non-relatives, their values are combined to test the ₹50k limit.
Monetary Gifts (Cash, Cheque, Bank Transfer) vs Immovable Property
The nature of the gift affects how the value is determined:
Cash/Bank Transfers: Any sum of money received in cash, cheque or bank transfer. If the total cash gifts from non-relatives in a year exceed ₹50,000, the entire cash amount is taxable
Immovable Property (Land, Buildings): The tax is based on the property’s stamp-duty value (SDV). Two cases arise
(i) If the property is fully gifted with no consideration and the SDV > ₹50k, the entire stamp value is taxable.
(ii) If the recipient pays some amount (a nominal consideration) and the SDV still exceeds that payment, the difference (SDV minus payment) above ₹50k is taxed.
Other Assets (Shares, Jewelry, Art, etc.): These are valued at Fair Market Value (FMV) on the date of gift. If an FMV-exceeds-₹50k gift is made without consideration, the full FMV is taxed.
Gift Tax Rules for NRIs Giving or Receiving Gifts Abroad
NRIs Receiving Gifts Abroad from Indian Residents
Under the Liberalized Remittance Scheme (LRS), Indian residents can gift up to USD $250,000 per year abroad. If the amount exceeds this, the resident needs RBI approval.
If the NRI receives this gift outside India, Indian tax will not apply, but FEMA reporting may.
Example: Your father sends $240,000 to your UAE account. You don’t pay tax in India, but your father must declare this under LRS while sending the money.
NRIs Sending Gifts Abroad to Foreign Relatives
NRIs can freely send gifts to relatives abroad from their NRE/NRO accounts, but must use banking channels.
Under FEMA, gifts to non-relatives abroad must be reported if they involve large sums.
Documentation NRIs Should Maintain for Gifts
What is a Gift Deed: Purpose, Stamp Duty and Format
A gift deed is a formal agreement signed by the donor and donee, clearly identifying both parties and the asset gifted. Under Section 17 of the Registration Act, any gift of immovable property must be put in effect by a registered deed on stamp paper. It should ideally be notarized or registered (where required) and specify the date of gifting. Maintaining a gift deed or similar record helps prove the transaction’s genuineness to tax authorities.
Proof of Relationship for Tax Exemption
To claim exemption on a gift from a relative, the burden is on the recipient to prove the relationship. Maintain documents such as birth certificates, marriage certificates, family registers, or legal affidavits that demonstrate the familial link. If the Income Tax Department inquires, you should also be able to prove the donor’s identity and financial ability.
Bank Transfer Proofs and Property Valuation Certificates
- Bank statements and transfer confirmations: They are essential for cash/cheque gifts. Keep copies of transaction receipts, bank advice or FC-GPR forms (if shares) showing the gift transfer.
For property gifts: Save the registered gift deed and stamp-duty valuation certificate (for SDV). Stamp authorities often provide a certified “Valuation Certificate” showing the stamp-duty value, which is the taxable basis.
For shares or jewellery: Get a certified fair-market valuation by a licensed valuer.
Such certificates establish the value used in tax calculations and will be needed if the IT department questions the gift’s valuation. In all cases, maintain a clear “paper trail” of the gift transaction.
Penalties for Misreporting or Ignoring Gift Tax Rules
Income Tax Department Notices and Assessment Risks
The Income Tax Department uses AI-based systems (2024-25 rollout) to flag large unexplained credits. If your Indian account receives ₹1 lakh+ from a non-relative without proof, you should expect a compliance notice under Section 142(1). Thereafter, interest (at ~10% p.a.) on the tax owed and penalties (100–300% under Sec 271(1)(c) for concealment) can be levied.
TDS Implications for Property Gifts to NRIs
When a property is gifted (without any payment) to an NRI, no TDS is applicable at the time of transfer. This is because gifts are not treated as sales under Indian tax law, so provisions like Section 194-IA (which applies to property purchases) do not apply. The transaction must be a genuine gift with no money exchanged.
However, TDS may apply later if the NRI earns rental income from the gifted property or sells it in the future. Rental income will attract TDS under Section 194-IB (5%), and if the property is sold, the buyer must deduct TDS on capital gains - typically 20% for long-term assets. So while the gift itself is tax-free, any future income or sale from it is taxable.
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