Gifts between an NRI and family in India: which way the money moves decides the rules

Short answer: a gift between an NRI and a relative in India is not taxed in the hands of whoever receives it, in either direction. A resident can send up to USD 250,000 a financial year under the Liberalised Remittance Scheme (LRS), including a rupee gift into an NRI relative's NRO account, and the bank collects 20% TCS on the part of the year's LRS remittances above ₹10 lakh. A gift from a non-relative is taxable once the year's total exceeds ₹50,000. And income that a gift to a spouse, daughter-in-law or minor child earns later is taxed on the giver.

The tax exemption is the part everyone knows. The route, the collection at the bank and the clubbing rule are the parts that produce the problems.

Four directions, four sets of rules

Resident parent to NRI child

Route one: foreign currency, sent abroad. A resident individual may remit up to USD 250,000 per financial year under LRS for any permitted purpose, and a gift is one. Each parent has a separate limit, so two parents can send up to USD 500,000 between them in a year. The remittance needs the parent's PAN and the bank's LRS form.

Route two: rupees, into the child's NRO account. A resident may make a rupee gift to an NRI or Overseas Citizen of India (OCI) who is a relative, by cheque or electronic transfer, credited to the recipient's Non-Resident Ordinary (NRO) account, the account for rupee money arising in India (what each account is taxed on is in NRE, NRO and FCNR accounts). The gift counts against the parent's USD 250,000 LRS limit, and the credit is an eligible credit to the NRO account. Once there, it is part of the child's NRO balance, and taking it abroad falls under the USD 1 million a year NRO facility.

Tax collected at source. On a remittance abroad under LRS, the bank collects TCS at 20% on the amount by which the parent's total LRS remittances for the year exceed ₹10 lakh, under Section 206C(1G) of the 1961 Act, now Section 394(1) of the Income-tax Act 2025. The ₹10 lakh is the parent's total across all purposes and all banks. TCS is not a cost: it is credited to the parent's PAN and set off against their tax, or refunded. The rates and the three ways to recover it are in TCS on foreign remittances in 2026.

Whether TCS applies to a rupee gift into an NRO account is less settled. The section applies to amounts received by the bank for remittance out of India, and a rupee credit to an NRO account does not leave India. Some banks nonetheless process it as an LRS transaction and collect. Ask the bank which way it treats the transfer before you make it, not after.

Tax for the child. None. A gift from a relative is excluded from the gift provisions of the Income-tax Act (below). Section 9(1)(viii) of the 1961 Act deems a sum paid by a resident to a non-resident without consideration to be income arising in India, but only where it would be taxable under the gift provisions. A gift from a parent is not. The rule is carried into Section 9 of the 2025 Act.

Two definitions of "relative", and why it matters

FEMA and the Income-tax Act do not use the same list.

The income-tax list covers the spouse, siblings, siblings of the spouse, siblings of either parent, lineal ascendants and descendants of the individual and of the spouse, and the spouses of those people. The Companies Act list is shorter.

The practical consequence: a grandparent in India can gift to an NRI grandchild free of Indian tax, but cannot use the rupee-gift-to-NRO route, because a grandchild is not a relative under Section 2(77). The grandparent would send foreign currency abroad under LRS instead.

NRI child to resident parent

FEMA. No limit. An NRI can send money to India, or pay from an NRE or NRO account to a parent's resident account, as a gift.

Tax. None for the parent: it is a gift from a relative, whatever the amount. The income-tax provision is Section 56(2)(x) of the 1961 Act and, from tax year 2026-27, Section 92(2)(m) of the 2025 Act, with the relative exception in Section 92(3). What the parent earns on the money afterwards, interest on a deposit for example, is the parent's own income. No clubbing applies, because a parent is not one of the relatives the clubbing rule covers.

What the bank wants. On an inward remittance the parent's bank will ask for the purpose, the sender and the relationship. Keep a short gift declaration signed by the sender, proof of the relationship, and the remittance advice. A large credit may surface in the parent's annual information statement, and the evidence of a gift from a relative is what answers any question about it.

Form 145 does not arise. Forms 145 and 146 are for payments out of India. They are not needed to receive money.

Your country of residence may have its own rules on gifts made or received. They are outside this note, but worth checking before a large transfer.

Gifts from people who are not relatives

The exemption is for relatives only. For anyone else, the recipient is taxed as follows under Section 56(2)(x) of the 1961 Act and Section 92(2)(m) of the 2025 Act:

The ₹50,000 is a cliff, not an allowance: ₹60,000 from a friend is taxed on ₹60,000. Gifts received on the recipient's own marriage, and under a will or by inheritance, are excepted whoever gives them.

Where a resident gifts to a non-resident who is not a relative, the deeming rule in Section 9(1)(viii) applies, the gift is income arising in India, and the non-resident is taxable here. That can also put a deduction obligation on the resident making the payment, which is rarely anticipated.

Gifting shares or property to an NRI

Immovable property. Under Rule 24(b) of the FEMA (Non-Debt Instruments) Rules 2019, an NRI or OCI may receive by gift any property other than agricultural land, a farm house or plantation property, from a person resident in India or from another NRI or OCI, who in either case must be a relative under Section 2(77) of the Companies Act. Agricultural land cannot be gifted to an NRI or OCI at all, though it can be inherited. For the donor, a gift is not a transfer for capital gains (Section 47(iii) of the 1961 Act, Section 70 of the 2025 Act). For the recipient, the donor's cost and holding period carry over when they later sell (Section 49, now Section 73).

Shares. Rule 9(4) allows a resident to gift equity instruments of an Indian company to a person resident outside India only with the Reserve Bank's prior approval, and on conditions: the donee must be eligible to hold the shares, the gift must not exceed 5% of the company's paid-up capital, the sectoral cap must not be breached, donor and donee must be relatives under Section 2(77), and the value gifted must not exceed USD 50,000 in a financial year. The prevailing practitioner view is that a gift to an NRI or OCI who will hold the shares on a non-repatriation basis is treated as a domestic transaction and does not need that approval. Confirm the treatment with the AD bank before the transfer is registered. The two ways a non-resident can hold Indian shares are compared in NRIs and foreign individuals investing in an Indian company.

The clubbing trap

A gift that is tax-free when made can still be taxed later, on the giver. Under Section 64 of the 1961 Act, now Section 99 of the 2025 Act, income from an asset transferred without adequate consideration is added to the transferor's income where the recipient is:

• the transferor's spouse;
• the transferor's son's wife;

and a minor child's income is added to the income of the parent with the higher income.

Clubbing does not stop the gift or make it taxable when made. It moves the tax on the income to someone who may not expect it, often at a higher rate, and it applies in each year the asset earns.

What to keep on file

1. A gift declaration or deed, with the date, amount, parties and relationship.
2. Proof of relationship, which matters twice because the FEMA and tax lists differ.
3. The bank advice and, for LRS, the remittance form and TCS certificate.
4. For property, the registered gift deed, and the stamp duty paid on it.
5. For shares, the RBI approval or the bank's confirmation that none was needed.

When the recipient later takes money out of India, this file is what the bank will ask for. The full sequence is in repatriating money from India: the full route.

This note sets out the general position as at 23 September 2026 under FEMA, the LRS and the Income-tax Acts of 1961 and 2025. The 2025 Act clause numbers for the gift provisions are given as they appear in the Act text and should be read with the CBDT's section mapping; whether TCS applies to a rupee gift into an NRO account depends on the bank's treatment. Confirm the route, the relationship under each definition and the bank's requirements before making a gift of any size.