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Gifts and remittances

Larissa Fernand

So you want to send a gift to your folks back home. And, you obviously are concerned about the tax impact. Would it be taxable in your hands? Would the person receiving the gift be liable to pay tax on it? There's good news for you on this front.

First and foremost, all the money you earn abroad, as long as you enjoy the status of being a non-resident Indian, is exempt from tax. So that's no tax on income for you.
If you decide to bring your earnings abroad to India, those too are tax-exempt.

Should you decide to send the money to someone in India, there again is no question of tax. In fact, the amount sent by you is not taxable irrespective of whether it is sent to your parents, your wife, your family or to your bank account.

Since the Gift Tax Act has been abolished with effect from October 1, 1998, there is no income tax chargeable on the recipient of the gift. So, you can go ahead and make the gift with a clear conscience. But, if the person receiving the gift decides to invest the amount and earns an income on it, then he or she is liable to pay tax on those earnings.

Now, if you have offered the gift to a minor, then under Section 64(1A) of the IT Act, all income that arises or accrues to the minor child shall be clubbed with the income of that parent whose total income is greater. This will go on till the child becomes a major.
As for the limit, there is no maximum limit for offering a gift in foreign currency.

If you decide to give a loan to an Indian out of your NRI income, that is a separate issue. If you give an interest-free loan, there will not be any tax implications since you are not going to be earning any interest on this loan. If you give a loan and levy a rate of interest on its repayment, then the interest is to be taxed in your hands since it is income arising in India.

So far as the principal amount is concerned, the onus lies on you to prove that it was out of your NRE account (or the account you have deposited your NRI earnings in). So, make sure that you do some paperwork stating that you are giving a loan, the amount involved, the name of the person being offered the loan, your relationship with that person, the reason for giving the loan, the rate of interest levied, the repayment tenure and from which bank account the amount was handed over.

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