Cash gifts from non-relatives not taxable up to Rs50,000 in a year

Gifts from a non-resident Indian will be exempt from tax if they are received from a relative or the value of the gifts received is less than Rs50,000 in a financial year


Hemant Mishra/Mint
Hemant Mishra/Mint

I would like to know if I have to pay tax on the money received from a non-resident Indian (NRI) for personal gifts and donations?

—Niharika Nag

There is no gift tax in India. However, any sum of money, movable property or immovable property received by an individual without consideration will be considered taxable, except gifts received from a relative. The term “relative” includes:

(i) Spouse

(ii) Brother or sister

(iii) Brother or sister of the spouse

(iv) Brother or sister of either of the parents

(v) Any lineal ascendant or descendant

(vi) Any lineal ascendant or descendant of the spouse

(vii) Spouse of the person referred to in clauses (ii) to (vi)

Also, cash or gifts in kind (presents) from non-relatives are not taxable up to a value of Rs50,000 in a financial year.

In your case, gifts from a non-resident Indian will be exempt from tax if they are received from a relative or the value of the gifts received is less than Rs50,000 in a financial year.

What is the taxability of interest on foreign currency non-resident (FCNR) deposits when an NRI becomes a resident and ordinarily resident (ROR) during the tenor of the deposit?
—Rohit Singh

Interest income from FCNR account is exempt from tax in India as long as the individual qualifies as non-resident or resident but not ordinarily resident (RONR) in India under the income-tax laws.

Please note that determination of residential status is different under the exchange control law and the income-tax law.

Once the individual qualifies as resident and ordinarily resident in India under the income-tax law, interest income from FCNR deposits will become taxable in India.

Will tax be deducted at source (TDS) from the interest on a non-resident ordinary (NRO) account? Are there any limits at which TDS deductions start?
—Jay K.

Interest income non-resident ordinary (NRO) account is taxable in India and there are no specific exemptions available for tax deduction at source for said interest. As such, tax is deducted by the bank at source on interest credited on NRO accounts at the rate of 30% (plus surcharge at the rate of 15% on tax if income is above Rs1 crore) plus education cess at the rate of 3% on tax.

In computing the total income, you could consider a deduction of Rs10,000 under Section 80 TTA of the Income-tax Act, 1961, on interest earned on a savings NRO account.

However, an individual living outside India and qualifying as a resident of another country can avail the benefit of a lower tax deduction on interest on NRO account under a Double Taxation Avoidance Agreement (DTAA).

Any individual intending to avail this option will have to inform the bank and submit a copy of the tax residency certificate from the country where she qualifies as a resident, along with other documents prescribed by the bank.

Sonu Iyer is tax partner & people advisory services leader, EY India.

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