Gifts received and given by NRIs under FEMA

Gifts received and given by NRIs under FEMA

  1. Gifts send by NRIs

There are no restrictions on the maximum limit of remittances by NRIs to their relatives or non-relatives, as per the FEMA Act. However, there are specific bars on gifts transferred under the Income Tax Act, 1961 which are:-

The taxability of gift would depend on the person from whom the gift is made, the occasion and the amount involved. Gifts received in the following situations are entirely free from tax:

  • From specified relatives or
  • On the occasion of the wedding of the individual or
  • Under a will or through inheritance or
  • In contemplation of death of the payer or from an individual by a trust created or established exclusively for the benefit of the relative of the individual.

In other situations, the gifts received in India or transfer of property for inadequate consideration, exceeding Rs.50,000 is deemed to be income in the hands of the recipient.

  1. Gifts send to NRIs

A resident individual may make a rupee gift to an NRI / PIO who is a relative of the resident individual (relative as spelled out in Section 2(77) of the Companies Act, 2013) under the Liberalised Remittance Scheme. As per the scheme, the maximum amount a resident individual can transfer is US$ 250,000 per fiscal year through crossed cheque or electronic transfer. The amount should be credited to the Non-Resident (Ordinary) Rupee Account (NRO) a/c of the NRI / PIO and credit of such gift amount may be treated as an eligible credit to NRO a/c.

The term relative includes: –

Father (including step-father), Mother (including step-mother), Daughter, Daughter’s husband, Son (including stepson), Son’s wife, Brother (including step-brother), Sister (including step-sister).

  • Gift of shares of Indian company from resident individual to an NRI

A resident individual holding Equity instruments (equity shares, debentures, preference shares and share warrants) in an Indian company may transfer such equity instruments to an NRI/OCI by a gift subject to a prior permission from the Reserve Bank of India and fulfillment of the following conditions:

  1. The recipient is eligible to hold such a security under relevant Regulations;
  2. The gift does not exceed 5% of the paid-up capital of the Indian company/each series of debentures/ each mutual fund scheme;
  3. The applicable sectoral cap in the Indian company is not breached;
  4. The donor and the recipient are ‘relatives’ within the meaning in section 2(77) of the Companies Act, 2013; and
  5. The value of security to be transferred by the donor together with any security transferred to any person residing outside India as a gift during the fiscal year does not exceed the rupee equivalent of US$ 50,000.

FEMA implication on gifts and Inheritances received by NRIs

Gift from Liquid Funds Immovable Property Shares and securities Interest in LLP
Resident Relative Yes

 

In foreign currency and Indian Rupees

 

Restricted to US$ 250,000 per FY

Yes

 

Remittance of sale proceeds restricted to US$1 million per FY

 

Yes

 

Several restrictive conditions applicable

 

No
Resident Non-Relative Yes

 

Only in foreign currency

 

Restricted to US$ 250,000 per FY

Yes

 

Remittance of sale proceeds restricted to US$1 million per FY

 

No No
Inherited/ held in own capacity Yes

 

Remittance restricted to US$1 million per FY

Yes

 

Remittance of sale proceeds restricted to US$1 million per FY

Yes

 

Remittance of sale proceeds restricted to US$1 million per FY

Yes

 

Remittance of transfer proceeds restricted to US$1 million per FY

 

Author CA. Krishna Kumar A is a Practising Chartered Accountant and can be reached at [email protected]

 

 

 

 

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