Gifting Property to NRIs

Gifting Property to NRIs

Gifting has always been a customary and social convention in India.

Gifts can be in the form of money, property, shares, jewelry, antiques, etc., and are received without any consideration. In simple words, it is an asset received by an individual without making a payment against it.

Can Property be Gifted to an NRI?

Yes, Non-Resident Indians (NRI) can receive gifts in the form of property from a resident Indian. And NRIs will have to disclose gifts received and pay tax on them as per the applicable tax rules.

It is also important to note that NRIs cannot purchase agricultural land or plantation property; however, it can be a gift to an NRI by resident Indians (relatives), or they can inherit it.

The treatment of gift tax is different when given to or received by relatives and when given to or received by non-relatives. The following people are considered relatives:

  • Father
  • Mother
  • Stepmother
  • Spouse
  • Children
  • Stepchildren
  • Grandparents
  • Child’s spouse
  • Grandchildren
  • Grandchild’s spouse
  • Siblings
  • Stepsister and stepbrother
  • Sibling’s spouse

All other persons are considered non-relatives.

Gift of Property by Resident Indian (Relative) is Not Taxable

The Finance Bill 2019 has imposed tax on any property situated in India that was transferred by a resident Indian to a “person outside India without any consideration” as “taxable in the hands of the receiver”.

Certain exceptions to the above taxation rule for gifts are in place, though. Accordingly, any gift received without consideration or for an inadequate consideration from specified relatives under the following conditions is not taxable:

  • On the occasion of marriage
  • Under a will
  • Inheritance

So, if a parent or grandparent gifts property to their children or grandchildren who are settled abroad, the property will not be taxable in India in the hands of the NRI children or grandchildren.

A father or grandparents are covered under the list of relatives, and any gift from them will not be treated as income in the hands of the recipient.

Gift of Property by Non-Relative Resident Indian is Considered as Income

The gift of immovable property to NRIs is permissible. However, the rules differ for gifts given by relative and non-relative resident Indians.

There are two situations when a gift of property received by an NRI is exempt from taxation in India irrespective of the “relative” status:

  • Gift of property through marriage.
  • Gift of property through a will.

When does your (NRI) gifted property from a non-relative resident Indian turn taxable?

  • If the Stamp Duty Value (SDV) of an immovable property received as a gift exceeds ₹ 50,000, the whole of such value is taxable.
  • Gifts exceeding ₹ 50,000 attract a gift tax to be paid by the receiver. The amount is added to the total income of the receiver and taxed as per their income tax slab. Under the Liberalized Remittance Scheme (LRS), income above $250,000 per financial year is taxable.

Understand guidelines and tax consequences before sending and receiving any kind of gifts. The issues can get complex based on the residential status of the individual involved in the gift exchange. Thus, it is also important to check the gift taxation rules of the country you are staying in.

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