Tax on gifted money

No tax to be paid if the sender is your close relative.

As per RBI rules, the remittance money received from persons abroad, who are your close relatives, is treated as a tax-free gift.

Close relatives are defined as:-

1.     Spouse of the individual

2.     Brother or sister of the individual

3.     Brother or sister of the spouse of the individual

4.     Brother or sister of either of the parents of the individual

5.     Any lineal ascendant or descendant of the individual

6.     Any lineal ascendant or descendant of the spouse of the individual

However, if you are receiving money from abroad and the sender is not related to you, then any amount over Rs. 50,000 (about US$ 700) will be liable to be taxed as your income. You’d have to pay income tax on the excess amount.

In the USA, you are allowed to send an unlimited amount of money to India.

If you are sending the money to your NRE/NRO account or to the bank account of your close relatives, then it is tax-free.

As per US law, a close relative of an individual is defined as:-

1.     A current or former spouse;

2.     A father, mother, guardian, brother, sister, son, daughter; or

3.     A father-in-law, mother-in-law, brother-in-law, sister-in-law, son-in-law, or daughter-in-law.

However, if you want to send money to your friend in India, then you can send money, tax-free, only up to US$ 14,000 per person per year. Beyond this amount, you’d have to pay a gift tax in the US.

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