22 May 2026Updated: May 2026
Gifting money or property to a family member is common in Indian families — and NRIs frequently transfer funds to parents, spouses, or children back home. The tax treatment depends on who the recipient is, what is being gifted, and through which channel the transfer is made.
The Core Rule — Section 56(2)(x)
Under Section 56(2)(x) of the Income Tax Act, any sum of money or property received by an individual is taxable in the hands of the recipient if:
- The aggregate value received without consideration exceeds ₹50,000 in a financial year, and
- The transfer is not from a specified "relative"
If the gift is from a relative (as defined), it is fully exempt — regardless of amount. There is no upper limit on tax-free gifts between relatives.
Who Counts as a "Relative" Under the Income Tax Act?
The definition under Section 56 includes:
- Spouse
- Brother or sister
- Brother or sister of the spouse
- Brother or sister of either parent
- Any lineal ascendant or descendant (parents, grandparents, children, grandchildren)
- Spouse of any of the above
Gifts between these relatives are fully exempt in the recipient's hands. An NRI sending money to parents, siblings, or children in India is not creating a taxable gift in the recipient's hands — irrespective of the amount.
Note: Gifts to a friend, or to a relative not on this list (such as a cousin or nephew), are taxable in the recipient's hands if the aggregate exceeds ₹50,000.
FEMA Rules — How the Money Must Travel
While the Income Tax Act governs taxability, FEMA (Foreign Exchange Management Act, 1999) governs how foreign funds can legally enter India.
An NRI can remit money to India under the Liberalised Remittance Scheme (LRS) or through normal banking channels. The permitted routes are:
- NRE account: Funds credited to an NRE account are freely repatriable. Gifts credited to a resident relative's account from an NRE account are permissible — but the recipient should receive funds into their own account, not the NRI's NRE account.
- NRO account: The NRI can transfer from NRO to a resident Indian's account. NRO funds represent India-sourced income and are subject to repatriation limits (USD 1 million per year).
- Direct remittance abroad to resident: An NRI can remit foreign currency directly to a resident relative's account in India via SWIFT — this is treated as an inward remittance and is not subject to LRS limits for the NRI.
FEMA does not impose a cap on how much an NRI can gift to a resident Indian relative from foreign earnings — but the transfer must flow through the banking channel, not as cash.
Gifts of Property
If an NRI gifts immovable property (not cash) to a resident, the rules differ:
- An NRI can gift residential or commercial property to a resident Indian who is a relative — FEMA permits this without RBI approval
- Agricultural land, plantation property, and farmhouses cannot be gifted by an NRI to a resident without prior RBI approval
- The recipient does not pay tax on receipt of gifted property from a relative (Section 56 exemption applies)
- When the recipient eventually sells the gifted property, capital gains are computed with reference to the original cost to the previous owner (the NRI) and the original date of acquisition
Clubbing Provisions — Watch Out for Income Arising on Gifted Assets
Under Section 64 of the Income Tax Act, if an NRI gifts assets (cash or property) to their spouse or minor child, any income arising from those assets is clubbed back into the NRI's income for tax purposes — even though the gift itself is exempt.
For example: an NRI gifts ₹50 lakh to their spouse in India, who invests it in fixed deposits. The interest income on those FDs is taxable in the NRI's hands, not the spouse's. This clubbing applies until the marriage subsists or until the child turns 18.
Gifts to adult children or parents do not attract clubbing.
Documentation for NRI Gifts
While there is no gift deed requirement for cash transfers, maintaining records is important:
- Bank remittance advice or SWIFT confirmation showing the transfer
- Relationship proof between donor (NRI) and recipient if the gift is large
- For property gifts: registered gift deed is mandatory under Section 123 of the Transfer of Property Act
- Form 15CA/CB is required if the remittance is above ₹5 lakh and falls in a taxable category — though gifts to relatives are typically exempt, the bank may still ask for Form 15CA Part A for documentation
NRI Gifting to a Non-Resident (Another NRI)
If both the donor and recipient are NRIs, the transfer is governed by FEMA rules for NRI-to-NRI transfers. Gifts between NRI relatives are permitted from NRE/FCNR accounts to the recipient's NRE account. There is no Indian income tax liability as neither party is a resident — but the recipient should ensure the funds are received in a FEMA-compliant account.
Regi Tom Antony And Associates advises NRIs on gift tax rules, FEMA-compliant remittance structures, Form 15CA/CB, and estate planning. Based in Kakkanad, Kochi. Contact: letstalk@rtaandassociates.com