Taxation
of Gifts in the hands of Non-Resident Indian
(NRI)
The rules regarding taxation of gifts as per Income
Tax Act, 1961 (‘the Act’) is applicable to Individual, Hindu Undivided Family
(HUF), Company, Partnership Firm and every artificial judicial person.
Any receipt of money, immovable and movable
property as gift without consideration or for inadequate consideration by any
person is chargeable to tax under “Income from Other Source” in the hands of
the recipient.
NRIs therefore need to consider the possibility of
attracting tax on any transaction in the nature of gifts which is received in
India for inadequate consideration or without consideration.
1. Gifts
received from a person are chargeable to tax in the hands of recipient and the
provisions relating to taxation of said gifts are tabulated below:
|
Kind of gift covered
|
Monetary threshold
|
Quantum taxable
|
|
a. Any sum of money without
consideration
|
Sum > Rs 50,000#
|
Entire sum of money
received
|
|
b. Any immovable property
without consideration
|
Stamp Duty Value* > Rs 50,000
|
Stamp duty value of the
property
|
|
c. Any immovable property
for inadequate consideration
|
Difference between Stamp
duty value and consideration, is higher
of following amounts: - Rs 50,000 and
- 10%** of consideration
|
Stamp duty value Minus Consideration
|
|
d. Any movable property (Refer
Note 1) without consideration
|
Fair market value (FMV)***
– (Refer Note 2) > Rs 50,000
|
FMV of such property
|
|
e. Any movable property# for
an inadequate consideration
|
FMV exceeds consideration
by > Rs 50,000
|
FMV Minus Consideration
|
#Refers
to Aggregate value of gifts received during the year
*Value
adopted by stamp duty authority for the purpose of stamp duty
**
As per proposed amendment in Budget 2020.
*** Value is to be determined as per Rules
prescribed for the purpose of calculating FMV for each property
Note 1: Movable
properties
· Movable assets includes
a. Shares and Securities
b. Jewellery
c. Bullion
d. Archaeological collection
e. Drawings
f. Paintings
g. Sculptures
h. Any work of art
Note
2: Determination of FMV - for various assets is explained below
· Quoted shares – price recorded on the stock
exchange
· Unquoted shares – value of such shares is to
be computed as per prescribed rules.
b. Other
capital assets such as Jewellery, Bullion, Archaeological collection, Drawings,
Paintings, Sculptures and any work of art - value of such asset shall be the price it would fetch in the open market.
2. Exceptions – The receipt of sum of money, gift or purchase of
movable and immovable property for inadequate
consideration is not taxable
even if it is exceeding the threshold of Rs.50,000/- if it is received
· from any relative*; or
· on the occasion of marriage of the
individual; or
· under a WILL or by way of
inheritance; or
· in contemplation of death of the
payer / donor; or or
· from any local authority; or
· from an individual by a trust created or established solely
for the benefit of relative of the individual or
· from any fund or foundation or
university or other educational institution or hospital or other medical
institution ;or
· from or by any trust or institution;
or etc
· from such class of persons and subject to such conditions, as may be prescribed (As per amendment in Finance Act, 2019); or
· By an individual from any person, in
respect of any expenditure actually incurred by him on his medical treatment or
treatment of any member of his family**, for any illness related to COVID-19
subject to certain conditions as prescribed by Central Government (As per
amendment in Finance Act, 2022); or
· By a member of the family** of a
deceased person from the employer of the deceased (no limit) or from any other
person/s to the extent of Es. 10 lakhs in aggregate where the cause of death is
illness related to COVID-19 and payment is received within 12 months from the
date of death of such person and subject to any other conditions as prescribed
by the Central Government (As per amendment in Finance Act, 2022)
*Relative in case of an individual means:
b. Brother or sister of individual or of spouse
c. Brother or sister of either parents
d. Lineal ascendant/descendant of individual or of spouse
e. Spouse of relatives mentioned in b. to d.
And in case of HUF means any member thereof.
** Family means
a.
Spouse
b.
Children of individual
c.
Parents/ Brother
/sister of individual wholly or mainly dependent on the individual.
3.
Income
deemed to accrue or arise in India:
Gift
of any sum of money on or after 5th day of July 2019, by a person resident in
India to a NR in his overseas bank account (not being a gift which are not
chargeable to tax as mentioned in point 2 above in excess of Rs 50,000) shall
be taxed in India.
Further,
gift of any sum of money on or after 1st day of April 2023, by a
person resident in India to a RNOR in his overseas bank account (not being a
gift which are not chargeable to tax as mentioned in point 2 above in excess of
Rs 50,000) may also be taxed in India.
4. Tax Rate – Receipt of gift is taxed as “Income from Other
Sources”, rate of tax will
depend on total income of the NRI as per slab rate of taxation under which the
NRI is covered.
Further, the person giving gift to such a NR
shall be liable to deducted tax at source (TDS) at the highest rate applicable
i.e. 30% on the amount of gift made to the NR.
Key points to be kept in
mind.
One observes the following
typical transactions by NRI/RNOR which may attract tax under the Act:
a. NRI receives credit of more than Rs. 50,000
in his NRO/NRE bank account from friends/relatives which may not be repayable
and which are not covered under the exceptions as mentioned in point 2 above.
b. NRI/RNOR receives credit of more than Rs.
50,000 in his overseas bank account from a person Resident in India which may
not be repayable and which are not covered under the exceptions as mentioned in
point 2 above.
c. NRI purchases an immovable property or shares
and securities of unlisted companies at a price which may not be in accordance
with prescribed rules of valuation.
Updated 01/2024