Key Takeaway
Gift tax in India applies to both giver and receiver under specific conditions. NRIs must understand exemptions, taxability, and compliance requirements for both domestic and international gifts.
In India, gift tax was abolished in 1998, but gifts received above certain limits are taxable in the hands of the recipient under the Income Tax Act. For NRIs, gift tax implications can be complex due to cross-border considerations and varying rules in different countries.
Gifts received from non-relatives exceeding ₹50,000 per year are taxable as "Income from Other Sources" at applicable slab rates.
Important: All gifts from non-relatives are clubbed together for the ₹50,000 limit calculation.
No tax liability regardless of amount
Taxable if aggregate > ₹50,000 per year
Foreign gifts exceeding ₹20 lakh per year require reporting under Foreign Contribution Regulation Act (FCRA).
FCRA Exemptions: Gifts from relatives, inheritance, personal use items up to ₹1 lakh
Situation: NRI receives ₹15 lakh from friend for house purchase
Tax Implication: Taxable as "Income from Other Sources" in India
Action Required: File ITR in India, pay tax at applicable slab rates
Situation: NRI parent gifts ₹50 lakh to child in India
Tax Implication: No tax liability (parent-child relationship)
Documentation: Maintain relationship proof and fund source documents
Situation: NRI in US receives $100,000 gift from US friend
Indian Tax: No Indian tax (non-Indian source, NRI status)
US Tax: Recipient generally not taxed, but may need Form 3520 filing
Route gifts through eligible relatives to avoid tax liability.
Spread large gifts across financial years to manage tax liability.
Structure as interest-free loan instead of gift (with proper documentation).
Time gifts around marriage or other exempt occasions.
| Country | Annual Exclusion | Lifetime Exemption | Tax Rate |
|---|---|---|---|
| India | ₹50,000 (non-relatives) | No limit for relatives | As per income tax slab |
| USA (2024) | $18,000 per recipient | $13.61 million | 18% - 40% |
| UK | £3,000 per year | £325,000 (inheritance) | 40% (inheritance tax) |