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Taxation of Gifts for NRIs – Guide by Casela Advisors

At Casela Advisors, your trusted Chartered Accountant for NRIs in India, we provide expert guidance on taxability of gifts under Indian Income Tax Law, especially for Non-Resident Indians (NRIs) and Resident but Not Ordinarily Resident (RNOR) individuals.

Understanding how gifts are taxed is critical, as tax authorities have tightened provisions around gifts received in India or abroad. NRIs receiving money, property, or assets without adequate consideration must evaluate the gift tax implications under the Income Tax Act, 1961.


1. What is Taxable as a Gift for NRIs?

As per Section 56(2)(x) of the Income Tax Act, any gift received without consideration or for inadequate consideration may be taxable in the hands of the recipient, under the head “Income from Other Sources”.

Types of Taxable Gifts and Their Thresholds

Type of GiftThreshold LimitAmount Taxable
Cash / Money received without consideration> ₹50,000 (aggregate in FY)Entire amount received
Immovable property without considerationStamp Duty Value > ₹50,000Entire stamp duty value
Immovable property for inadequate considerationDifference > ₹50,000 or 10% of consideration (whichever is higher)Stamp Duty Value – Consideration Paid
Movable property (e.g., shares, jewellery) without considerationFMV > ₹50,000 (aggregate)Entire FMV
Movable property for inadequate considerationFMV exceeds consideration by > ₹50,000FMV – Consideration Paid

⚠️ Note: These thresholds apply on an aggregate basis for the whole financial year.


2. What is Considered “Movable Property”?

Gifts of the following movable assets may be taxable if value exceeds limits:

  • Shares and Securities
  • Jewellery
  • Bullion
  • Drawings, Paintings, Sculptures, Artworks
  • Archaeological Collections

FMV (Fair Market Value) is determined:

  • Quoted shares: based on stock exchange price.
  • Unquoted shares: as per Rule 11UA valuation.
  • Other assets: Open market value.

3. Tax-Free Gifts – Exceptions for NRIs

No tax is applicable on gifts (regardless of value) if received:

✅ From a Relative (as defined below)
✅ On the occasion of marriage
✅ Under a will or inheritance
✅ In contemplation of death
✅ From local authorities
✅ From registered charitable institutions or educational/medical trusts
✅ Towards COVID-19 medical or death relief (subject to conditions)

Who is a “Relative” for NRI Gift Tax Exemption?

For individuals:

  • Spouse
  • Siblings (self/spouse)
  • Siblings of parents
  • Lineal ascendants/descendants (self/spouse)
  • Spouse of above relations

For HUFs: Any member of the HUF.


4. Gift Received in Foreign Bank Account – Is It Taxable in India?

Yes. As per the latest amendments:

🛑 Taxable in India if:

  • Gifted by a Resident Indian to an NRI or RNOR
  • Gift value exceeds ₹50,000 and not covered by exemption
  • Gift is credited to a foreign bank account (after July 5, 2019 for NRIs; after April 1, 2023 for RNORs)

Such gifts are deemed to accrue in India and are taxable in India.


5. What Is the Tax Rate on Gifts for NRIs?

Gifts received (that are not exempt) are taxed as “Income from Other Sources” at applicable slab rates. In most cases, NRIs fall under the highest tax bracket.

Moreover, TDS at 30% is required to be deducted by the resident person gifting to an NRI, on the full amount of gift, if taxable.


6. Real-World Scenarios Where NRI Gift Tax Applies

As experienced NRI tax consultants, we frequently see the following situations:

🔹 An NRI receives ₹1 lakh into their NRO/NRE account from a friend in India, without any documentation or intent of repayment.

🔹 An Indian resident transfers ₹2 lakhs to an NRI’s foreign account, which is not a loan or inheritance, and not from a relative.

🔹 An NRI purchases unlisted shares or property at undervalued price compared to Fair Market Value (FMV).

In all the above, gift tax liability may arise.


NRI Gift Tax Advisory – Why Choose Casela Advisors?

At Casela Advisors, we help NRIs and RNORs:

  • Verify taxability of gifts received
  • Evaluate and apply exemptions
  • Ensure TDS compliance for resident donors
  • Draft gift deeds for tax-proof documentation
  • File ITR to report or claim refund of tax on gifts
  • Navigate gift tax on foreign remittances

💡 Summary: Important Tips for NRIs

✔️ Keep documentary evidence for all major receipts in NRE/NRO or foreign accounts.
✔️ Maintain proper valuation reports for any property received or purchased at low cost.
✔️ Always check relationship criteria to claim exemption.
✔️ Ensure the donor deducts TDS where required.
✔️ File your Income Tax Return in India to stay compliant and claim refund if excess tax is deducted.


📞 Need Help with NRI Gift Tax Compliance?

Contact Casela Advisors – your expert Chartered Accountant for NRI Income Tax, Gift Tax, and FEMA compliance.

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Gifts - Casela Advisors