If you are an NRI (Non-resident Indian), you may receive many gifts from your loved ones residing back home in India. People in India love to be generous with their gifts as they consider gifting as a way to express affection. However, when it comes to sharing gifts across international borders, it is subject to various financial and tax regulations.

The tax laws on gifting and inheritance to NRIs by resident Indian citizens are specially crafted to prevent money laundering and tax evasion. As per the FEMA (Foreign Exchange Management Act), NRIs can receive gifts from resident Indians, but they must adhere to certain guidelines and comply with the prevailing tax laws.

Things to know about Gifts

As an NRI, there are no limits on the amount of money you can receive as a gift from an Indian resident. However, for all high-value transactions, the giver must maintain a record of the gift, including the relationship with you and the purpose of the gift, and provide sufficient clarification upon questions from the tax authorities.  

Things you can receive as Gifts

You can receive a wide range of things as gifts from residents of India, including cash, securities, shares, and immovable properties. However, as per the FEMA mandate, receiving agricultural land, farmhouse etc., as gifts are prohibited.

Tax implications on receiving Gifts 

There are no tax liabilities when you receive any gift valued up to or less than Rs. 50,000/-. However, gifts worth more than Rs. 50,000/- are taxable unless given by a relative, as defined under the Income Tax Act.

Also, you must be aware of your tax liability in your country of residence, as many countries impose tax on global (overseas) income, including gifts received. So, it is advisable that you consult a tax professional and be tax-compliant, both in India and abroad.

Things to know about Inheritance

As an NRI, you are legally entitled to inherit property from your family members who are resident Indians. As per the FEMA regulations, you can inherit different kinds of assets like residential or commercial real estate property, agricultural land, farmhouses, etc.

However, if you inherit any property from another NRI, it is subject to various regulations. In such instances, you must get approval from the RBI (Reserve Bank of India). This is a mandatory requirement, and you cannot inherit the property, if you don’t get the approval.

Limitation on Repatriation of the sales proceeds of the Inherited Property

As an NRI, when you inherit any immovable property located in India, you cannot repatriate the sale proceeds from the sale of such property without getting prior permission from the RBI. However, as per RBI norms, for NRIs, repatriation of up to USD 1 Million is permitted, if the property is acquired under the following conditions –

1. The property is located in India and is actuated for a person residing in India through inheritance
2. The property is received from someone who has retired from employment in India
3. The property is received from a person who has also inherited the same from their spouse, who is an Indian resident

Documents required to Transfer the Title of Inherited Property

1. Will
2. Nomination
3. Probate
4. Succession Certificate
5. Original Purchase Deed and Registration Documents
6. Encumbrance Certificate

Conclusion

As an NRI, when you inherit any property or receive a gift from your loved ones in India, you must be aware of the related laws and comply with them to avoid any legal issues in the future. And for all your cash transactions, i.e., depositing the money received in cash as a gift or the proceeds from the sale of your inherited property, it must be done only through legal channels, ideally a bank account.

Disclaimer: The article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of The South Indian Bank Ltd. or its employees. The South Indian Bank Ltd and/or the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial/non-financial decisions based on the contents and information’s in the blog article. Please consult your financial advisor or the respective field expert before making any decisions.