Home / Money / Calculators /  Unless received from relatives, income tax can be levied on gifts

I am a non-resident Indian (NRI) based in Sydney. I have some shares of an Indian listed company. I want to sell some of them and also gift some to my sister. Will either of us be taxed for this?

—Nimesh Srivastav

Capital gains from sale of shares of an Indian company are taxable in India. A person whose total taxable income in India is less than Rs2.5 lakh (currently) is not liable to pay tax. Capital gains on sale of equity shares listed on a recognised stock exchange in India will be classified as long-term if held for more than 12 months. Long-term capital gains (LTCG) from sale of such listed shares are tax exempt provided the securities transaction tax (STT) has been paid on them. If held for less than 12 months, their sale will attract short-term capital gain (STCG) tax at the rate of 15%, plus applicable surcharge and education cess, provided STT has been paid. The effective rate of this tax is, thus, 17.77%.

Income tax is levied on any sum of money, movable property or immovable property received by an individual without consideration (i.e., without a quid pro quo), except gifts received from a relative. Apart from spouse, the term ‘relative’ includes: brother or sister, brother or sister of the spouse, brother or sister of either of the parents, any lineal ascendant or descendant, any lineal ascendant or descendant of the spouse, spouse of any of the person referred to above.

Therefore, gift of shares to your sister will have no tax implications in India, neither for you nor for your sister. However, subsequent sale of shares by your sister will be taxable in India as described above. The cost of acquisition of the shares for your sister will be the cost at which you would have purchased them.

I’m going to London for a 10-month course. I will have no source of income during this period. How much money can be remitted to me by my parents during this time, and will I be taxed for it?

—Bhaskar Pant

Under the Liberalised Remittance Scheme, all resident individuals are allowed to freely remit up to $250,000 per financial year for transactions specified under the scheme. The remittances can be made in any freely convertible foreign currency.

Remitting money for studying abroad is one of the permitted transactions under the scheme.

Hence, your parents may remit money up to a maximum of $250,000 if the 10 months course runs between April to March. There will be no tax implications for you and your parents in India due to it.

I am a person of Indian origin (PIO) based in the US. Can I lend money to my sister in India? What will be the limit for it and the tax implications on both of us?

—Lakshmi Nair

Yes, you may lend money to your sister in India and it will have no tax implications in India so long as it can be explained as loan to a sister.

You may also note that under the Indian income-tax laws, there is no gift tax in India.

Also, cash gifts exceeding Rs50,000 are considered as income in the hands of the recipient, except if the amount is received from relatives or on special occasions like marriage or under a Will.

Relatives, for this purpose, include brothers or sisters of the individual. Hence, a gift of money to your sister in India will also have no tax implication for either of you.

I work from home in India, for a UK-based company. My salary is credited to an account in the UK in euros, and then transferred to my Indian account. How will I be taxed on my income?

—Sayantani Guha

Taxability in India depends on the following factors:

— Source of income

— Residential status

Any income, the source of which is located in India, is taxable in India (irrespective of residential status).

Residential status is determined on the basis of physical presence of an individual in India during a financial year.

An individual with the residential status of ‘resident and ordinarily resident’ is taxable on her global income and required to report these global assets in her India tax return.

However, a non-resident or ‘resident but not ordinarily resident’ is liable to pay tax only on India-source income.

Salary income received in the UK, for the period of employment exercised in India, will be taxed in India as the services were rendered in India (irrespective of residential status).

As no India-specific income-tax is withheld by your UK-based employer, you may deposit the tax under the advance tax mechanism as per the following schedule:

— 5—% of total tax by 15 June

— 45% of total tax by 15 September

— 75% of total tax by 15 December

— 100% of total tax by 15 March

You may also deposit tax as self-assessment tax before filing the income-tax return in India.

However, in such case, interest for late or non- deposit of advance tax will be applicable. In case of double taxation, appropriate benefit may be claimed in India under the Double Taxation Avoidance Agreement (DTAA) between India and the UK.

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

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