INDIA: Amount Gifted By Relative to Senior Citizen Not Taxable

NEW DELHI (ExpressMoney), June 10, 2006: Is the amount gifted to a non-tax paying senior citizen by his Non Resident Indian (NRI) relative, for his maintenance, taxable if the gifted amount exceeds the income tax exemption limit? Kanu Doshi, Dean-Finance, Welingkar Institute of Management, has this expert comment: Any gift made to a resident Indian by a close relative, whether a resident or a non- resident, is outside the purview of taxation under the Income tax Act, 1961, irrespective of the amount of gift. For the purposes of this section, the term ‘relative’ would include the following: (i) The spouse of the person receiving the gift; (ii) His brother or sister; (iii) The brother or sister of his spouse; (iv) The brother or sister of either of his parents; (v) Any lineal ascendant or descendant of the recipient of the gift; (vi) Any lineal ascendant or descendant of his spouse (vii) The spouse of the persons referred to in clauses ii to vi above Gifts received from such close relatives are totally exempt from tax without any upper limit. However, gifts of sums of money from non-relatives, if they collectively exceed Rs 25,000 in a year, are treated as income in the hands of the recipient and are to be included in the total income under the head “income from other sources” and taxed accordingly. If a senior citizen (someone who is 65 years old or more) has taxable income of Rs 125,000 and if he receives a gift of Rs 50,000 from a non relative then such gift will not suffer tax since the total taxable income is still below Rs 1,85,000 — the basic exemption for senior citizens at present. A person who remains outside India for more than 182 days (not 180 days) in a financial year computed with reference to 1 April to 31 March, acquires the status of a non-resident Indian under the Income Tax Act, 1961. A non-resident is taxed only in respect of the income he earns in India. By implication, his income earned outside India does not suffer any tax in India even if he brings it to India. © Indian Express Newspapers (Mumbai) Ltd. All rights reserved