- Date : 01/02/2023
- Read: 3 mins
Do you have relatives in the US? Have you received gifts from them or are expecting gifts from them? If yes, you should read this article to understand gift tax in India.
According to Indian tax laws, any amount received as a gift by a blood relative living in the United States (US resident) is not taxable in India i.e exempted from gift tax. This means that individuals in India who receive money or other gifts from their relatives living in the US will not be required to pay taxes on those gifts i.e no gift tax in India. This rule applies to all blood relatives, including parents, siblings, children, and grandparents. This article will explain in detail about applicable gift tax in India and provide insight into how it affects those who receive a gift from a relative living in the US.
As per Section 56(2) of IT Act, 1961, who all can be considered as relatives?
As per the above Section of IT Act, the following can be considered relatives and gifts received by them would be exempt from gift tax.
- Husband/ wife
- Brother and his wife
- Sister and her husband
- Wife’s brother and his spouse
- Wife’s sister and her spouse
- Kaka-Kaki (Tauji- Taiji)
- Fua-Foi (Phupa-Bua)
- Mama-Mami
- Masa-Masi
- Father-Mother
- Grandfather-Grandmother
- Daughter and her spouse
- Son and his spouse
- Mother-in-law and Father-in-law
- Grand Mother-in-lawand Grand Father-in-law
What is considered a gift for Income Tax purposes?
A gift for tax purposes is when a person receives money, property, or something else of value without giving adequate compensation in return.
Also Read: To know more about various available Investment options
Can a US resident gift money to blood relations in India? If yes, what can be tax implications for the people receiving the money?
In India, any monetary gift received from relatives (as specified above) is not subject to any gift tax. Neither the giver nor the recipient has to worry about any tax implications. However, the sender of the money may have to consider potential taxation issues in the United States, depending on the amount sent.
Also Read: To understand more about tax implications
What would be the tax implications if the relative receiving the gift invests the money received somewhere and earns interest?
If the relative receiving the gift invests the amount anywhere in India it will not have any implications for the person who gave the money as a gift. However, the recipient of the gift will get taxed, according to applicable Indian laws for the interest earned on FDs, etc or for the gains booked on equities or mutual funds. The earnings (interest or gains) from the received gift would be included in the earnings of the recipient and s/he would be taxed at per applicable income tax rate (currently 30% is the highest tax slab for individuals).
It is worth mentioning here that gifts received from non-relatives or friends may be taxable if the total value is more than INR 50,000 in the financial year.
Also Read: To understand markets/ insights
In conclusion, it is important to note that gifts received from blood relatives living in the United States are not taxable in India, according to Indian tax laws. However, US residents sending gift money to India should be aware of potential taxation issues in the United States, depending on the amount sent. Additionally, the recipient of the gift money may have to consider tax implications for any earnings or gains made from investing the gifted amount. It is important to understand the tax implications of gift amounts in India in order to ensure compliance with the applicable laws.
According to Indian tax laws, any amount received as a gift by a blood relative living in the United States (US resident) is not taxable in India i.e exempted from gift tax. This means that individuals in India who receive money or other gifts from their relatives living in the US will not be required to pay taxes on those gifts i.e no gift tax in India. This rule applies to all blood relatives, including parents, siblings, children, and grandparents. This article will explain in detail about applicable gift tax in India and provide insight into how it affects those who receive a gift from a relative living in the US.
As per Section 56(2) of IT Act, 1961, who all can be considered as relatives?
As per the above Section of IT Act, the following can be considered relatives and gifts received by them would be exempt from gift tax.
- Husband/ wife
- Brother and his wife
- Sister and her husband
- Wife’s brother and his spouse
- Wife’s sister and her spouse
- Kaka-Kaki (Tauji- Taiji)
- Fua-Foi (Phupa-Bua)
- Mama-Mami
- Masa-Masi
- Father-Mother
- Grandfather-Grandmother
- Daughter and her spouse
- Son and his spouse
- Mother-in-law and Father-in-law
- Grand Mother-in-lawand Grand Father-in-law
What is considered a gift for Income Tax purposes?
A gift for tax purposes is when a person receives money, property, or something else of value without giving adequate compensation in return.
Also Read: To know more about various available Investment options
Can a US resident gift money to blood relations in India? If yes, what can be tax implications for the people receiving the money?
In India, any monetary gift received from relatives (as specified above) is not subject to any gift tax. Neither the giver nor the recipient has to worry about any tax implications. However, the sender of the money may have to consider potential taxation issues in the United States, depending on the amount sent.
Also Read: To understand more about tax implications
What would be the tax implications if the relative receiving the gift invests the money received somewhere and earns interest?
If the relative receiving the gift invests the amount anywhere in India it will not have any implications for the person who gave the money as a gift. However, the recipient of the gift will get taxed, according to applicable Indian laws for the interest earned on FDs, etc or for the gains booked on equities or mutual funds. The earnings (interest or gains) from the received gift would be included in the earnings of the recipient and s/he would be taxed at per applicable income tax rate (currently 30% is the highest tax slab for individuals).
It is worth mentioning here that gifts received from non-relatives or friends may be taxable if the total value is more than INR 50,000 in the financial year.
Also Read: To understand markets/ insights
In conclusion, it is important to note that gifts received from blood relatives living in the United States are not taxable in India, according to Indian tax laws. However, US residents sending gift money to India should be aware of potential taxation issues in the United States, depending on the amount sent. Additionally, the recipient of the gift money may have to consider tax implications for any earnings or gains made from investing the gifted amount. It is important to understand the tax implications of gift amounts in India in order to ensure compliance with the applicable laws.
