14 May 2025Updated: May 2026
Gifting by NRIs — whether of money, property, or other assets — triggers tax and FEMA compliance obligations on both sides of the transaction. The rules differ depending on who is giving, who is receiving, what is being gifted, and whether the gift crosses an international border. Most gifting mistakes by NRIs arise from assuming that family gifts are automatically exempt — which is only partially true under Indian law.
When Is a Gift Taxable in the Recipient's Hands?
Section 56(2)(x) of the Income Tax Act taxes "gift income" in the hands of the recipient where:
Money received without consideration exceeds ₹50,000 in aggregate in the financial year — the entire amount becomes taxable as income from other sources, not just the excess over ₹50,000.
Immovable property received without consideration where the stamp duty value exceeds ₹50,000 — the stamp duty value is taxable.
Immovable property received for inadequate consideration where the difference between stamp duty value and consideration exceeds ₹50,000 (and also exceeds 10% of consideration) — the shortfall is taxable.
Movable property (shares, jewellery, art, etc.) received without consideration where the fair market value exceeds ₹50,000 — FMV is taxable.
The Exempt Gifts: Relatives and Special Categories
Section 56(2)(x) provides a complete exemption for gifts received from "relatives" as defined in the Act. The definition of relative includes: spouse, brother/sister, brother/sister of spouse, brother/sister of either parent, any lineal ascendant or descendant of the individual, any lineal ascendant or descendant of the spouse, and spouses of all the above.
Key point: gifts between parent and child, between spouses, and between siblings are exempt regardless of amount. Gifts to cousins, friends, or non-relative business associates are taxable above ₹50,000.
Additionally, gifts received on the occasion of marriage (from any person, not just relatives) are fully exempt. Gifts received by way of inheritance or under a will are also exempt.
NRI Gifting Money to Resident Relatives: FEMA Position
An NRI can gift money to a resident relative from an NRE or FCNR(B) account by inward remittance or by direct transfer. Under Schedule III of the FEMA (Current Account Transactions) Rules, gifts to relatives by NRIs are permissible current account transactions — no RBI approval is needed. However, the gift must be from the NRI's own funds (NRE/FCNR), not from an NRO account where the funds are India-source income subject to the USD 1 million repatriation cap.
NRI Gifting Property in India
An NRI can gift residential or commercial property to a resident Indian relative without RBI permission. Agricultural land, plantation property, and farmhouses cannot be gifted by an NRI to a resident Indian — prior RBI approval is required. The recipient of the gifted property will be liable for tax on the stamp duty value of the property under Section 56(2)(x) unless the donor is a relative.
The NRI donor has no capital gains tax liability on the gift itself — capital gains arise only on actual transfer for consideration. However, when the recipient later sells the gifted property, their cost of acquisition for capital gains purposes is the cost at which the original owner (NRI) acquired the property, and the holding period includes the NRI's holding period.
Clubbing Provisions: Watch for Section 64
If an NRI gifts money to a spouse or minor child and the recipient invests it to earn income, Section 64 of the Income Tax Act clubs that income back with the NRI donor's income for tax purposes. This applies to gifts that generate income — not to consumption gifts. NRIs gifting large amounts to spouses for investment purposes should be aware that the investment returns will be taxed in the NRI's hands, not the spouse's.
Documentation Requirements
Gifts above ₹2 lakh in value should be documented with a gift deed, particularly for property. For money gifts, bank transfer records and a written acknowledgment are advisable. The recipient should maintain documentation confirming the donor's relationship (for the relative exemption) and the occasion (for marriage gifts). This documentation is relevant if the AIS triggers an income tax query on the receipt.
For detailed guidance on NRI gifting, inheritance, and succession planning under Indian tax and FEMA law, refer to NRI Tax Blueprint 2025 by CA Regi Tom Antony — available on Amazon. For NRI advisory resources, visit nriblueprint.com.
Regi Tom Antony And Associates provides NRI tax advisory, gift tax planning, FEMA compliance, and ITR filing services for NRIs across all countries of residence. Contact: letstalk@rtaandassociates.com | Kakkanad, Kochi.