Key Highlights
- It is not linked to services, repayment obligations, or commercial arrangements. The Income-tax Act, 1961, provides a specific exemption from gifts received from “relatives”. Parents and Children are within the definition of relatives as per Section 56(2)(x).
- Therefore,Any amount of money received by parents from their son is fully exempt from income tax, irrespective of the value of the Gift. The exemption applies equally whether the son is a resident or an NRI. While the gifted amount itself is tax-free, any income generated from such gifted money, like bank interest, return on investments, or rental income from assets purchased, etc., is taxable in the hands of the parents at the applicable rates. Although the gift is exempt from taxes, it is advisable to report it under the “Exempt Income” or “Schedule EI” in the income-tax return for transparency. What are the FEMA rules on NRI remittances to parents?Under FEMA, the inward remittances from an NRI to resident family members are permitted, and such funds may be transferred from either the NRI’s overseas account or NRE/NRO account maintained in India. No special approval is required from the Reserve Bank of India (RBI) for such transfers, provided the funds originate from legitimate sources.
- While the bank has the authority to seek clarification or documentation to establish the nature of the transaction, it only does so when the amount involved is huge. What documents are required?There is no need to execute a gift deed while gifting money from abroad to parents in India. Also Read: Leaving India for Work?
- Avoid THESE Costly NRI Money ErrorsHowever, from a practical point of view, a simple written gift deed or declaration is recommended.
- Supporting documents such as bank remittance advice, transaction statements, and proof of NRI status may further strengthen the record. What does this mean for the sender?Exemption from Clubbing: Unlike gifts to a spouse, income generated from money gifted to parents is not clubbed back to the son.
