I worked in the UAE for over a decade and have now returned to India permanently. While I was a UAE resident, I purchased an immovable property in the UAE. Now that I am settled in India, I, as a sister, would like to gift this property to my brother, who continues to reside in the UAE. Will my brother or I be required to pay any tax in India on this proposed gift transaction?
– Name withheld on request
Under the provisions of the Income-tax Act, 2025, gifts received from specified relatives are exempt from tax. Since a brother and sister are covered within the definition of 'relative', the proposed gift of the UAE immovable property by you to your brother would qualify for this exemption. Accordingly, neither you nor your brother will be liable to tax in India on account of the gift transaction.
From a FEMA perspective, the Overseas Investment (OI) Rules, which impose certain restrictions on the transfer of foreign immovable property by way of gift, do not apply to foreign assets that were acquired by an individual while he or she was a person resident outside India.
Since the UAE property was acquired by you during the period when you were a UAE resident, it falls outside the scope of the FEMA OI Rules. Therefore, the proposed gift of the UAE property to your brother, who is a UAE resident, should be permissible under FEMA as well.
I am a UK resident and am married to an Indian citizen. I hold an OCI card and would like to invest in Indian equities for capital appreciation. For this purpose, what type of bank account should I open in India that will be tax-compliant?
– Name withheld on request
As an OCI cardholder, typically, you may open either a Non-Resident External (NRE) account or a Non-Resident Ordinary (NRO) account in India for making investments in Indian equities.
From an Indian tax perspective, the taxation of gains arising from the sale of listed equities— whether as short-term capital gains or long-term capital gains— will remain the same irrespective of whether the investments are made through an NRE account or an NRO account. Thus, you may open either an NRE account or an NRO account.
However, if you anticipate claiming a tax refund in India (for example, due to excess tax deducted at source or excess advance tax paid), you should maintain an NRO account as well. This is because the Indian income-tax department generally credits tax refunds only to an NRO bank account, and refunds are not credited to an NRE account or a foreign bank account due to the lack of an enabling mechanism.
From a FEMA perspective, the choice between an NRE (fully repatriable) account and an NRO (restricted repatriability: up to $ 1 million per FY) account should be determined based on the anticipated volume and nature of funds that may need to be repatriated from India to the UK.
Harshal Bhuta, partner, P. R. Bhuta & Co. CAs
