- Date : 25/06/2023
- Read: 3 mins
Discover the surprising tax implications of receiving gifts from NRIs. Uncover the financial impact and ensure you're prepared. Read this article for more information.
Gifts received from NRIs exceeding Rs. 50,000 are subject to tax as "Income from other sources" based on the gift value and relationship between the giver and recipient.
However, gifts received on occasions like marriage or under a will are exempt from taxation.
It is crucial to disclose gifts from NRIs exceeding the specified threshold in your income tax returns.
Are you aware of the tax implications of receiving gifts from Non-Resident Indians (NRIs)? Whether it's a financial windfall or a thoughtful gesture, understanding NRI gift tax is essential. This article will shed light on gift tax exemptions and help you maximize benefits while minimizing tax implications. Avoid surprises, penalties, and optimize your tax savings when it comes to gifts from NRIs.
Who is a NRI?
An NRI is an individual who meets specific conditions to be considered a resident of India under the Income Tax Act. These conditions involve being employed or engaged in business outside of India, or spending less than 182 days in India during the relevant financial year.
What is gift tax in India?
Gift tax in India, regulated by Section 56 of the Income Tax Act, 1961, applies to property or money transfers without consideration. While gift tax was abolished in 1998, gifts (including non-cash gifts) exceeding Rs. 50,000 in a financial year are taxable as "Income from other sources."
The tax liability varies based on the gift's value and the recipient's relationship to the giver. In addition, non-cash gifts are assessed based on their market value at the time of receipt.
It is important to note that gifts from NRIs exceeding Rs. 50,000 should be disclosed in your ITR with the donor's details.
Which NRI gifts are not taxed?
Gifts received on occasions like marriage, or under a will, are tax-exempt. Furthermore, gifts from certain relatives, including parents, spouse, and siblings, are also not subject to taxation.
What are the capital gains tax implications for selling a house received as a gift from an NRI?
The capital gains tax implications for selling a house received as a gift from an NRI depend on various factors. In the case of gifted property, the date of acquisition by the original owner is considered for indexation and capital gains calculation. By deducting the indexed cost of acquisition and the cost of improvements, one can determine the capital gains. These gains are subject to a 20% tax rate after indexation.
To potentially save on taxes, options include reinvesting the gains in a new property, purchasing capital gains bonds and more, while complying with the specified conditions for claiming a tax exemption on capital gains.
Understanding gift tax implications in India is crucial for NRI gift recipients. Gifts above Rs. 50,000 are taxable, but exceptions apply for marriage, will-related gifts, and specified relatives. Complying with tax regulations ensures compliance and maximises tax savings.
Related: ABCs of a gift deed
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