Income transfer
This query is : Resolved
01 August 2013
Anybody can plz tell me that any amount transfer by NRI to his relative resident of India is taxable in hands of that relative???
And income arrived from that amount is taxable in whose hands??
Plz explain in detail...
And income arrived from that amount is taxable in whose hands??
Plz explain in detail...
01 August 2013
Amount transferred by NRI is treated as remittance and it is not taxable in the hands of NRI's Indian Resident Relative.
.
From the amount so transferred if any income is earned by the Resident, the resident will be liable for tax.
.
However, if the resident is a spouse, or son's wife of the NRI, as per section 64 clubbing provisions will be applicable and the said income will be assessed in the hands of NRI as income accrued or arisen in India.
.
.
From the amount so transferred if any income is earned by the Resident, the resident will be liable for tax.
.
However, if the resident is a spouse, or son's wife of the NRI, as per section 64 clubbing provisions will be applicable and the said income will be assessed in the hands of NRI as income accrued or arisen in India.
.
Message likes :
1 times
01 August 2024
When an NRI (Non-Resident Indian) transfers money to a relative who is a resident of India, here’s how the tax implications generally work:
### **1. Taxability of the Transfer Amount**
- **For the Relative in India**:
- **Gift Tax**: If the amount transferred is in the nature of a gift, it is generally **not taxable** in the hands of the recipient if the amount received is within the limits specified under the Income Tax Act. Under **Section 56(2)(x)** of the Income Tax Act, 1961, if an individual receives a gift from a relative, it is exempt from tax.
- **Definition of Relative**: The term "relative" includes spouse, brother or sister of the individual, or any lineal ascendant or descendant of the individual. If the recipient falls under this definition, the gift is exempt from tax, irrespective of the amount received.
### **2. Taxability of Income Arising from the Transferred Amount**
- **Income from the Gifted Amount**:
- **Taxable in the Recipient’s Hands**: Any income earned from the gifted amount (like interest, dividends, or capital gains) will be taxable in the hands of the recipient. For example, if the relative invests the gifted money and earns interest or capital gains, that income will be subject to tax in the recipient’s hands.
### **3. Sections Relevant to the Taxability**
- **Section 56(2)(x)**: This section deals with the taxation of gifts received from non-relatives. However, if the gift is received from a relative, it is generally exempt from tax under this section.
- **Sub-sections under 56(2)(x)**: These sub-sections outline the conditions under which gifts are considered taxable and the exemptions provided for gifts received from relatives.
- **Section 10(5)**: This section provides exemptions for certain gifts, but the primary reference for gifts from relatives falls under Section 56(2)(x).
- **Income from Investments**: Any income generated from the gifted amount (like interest from a savings account or dividends from shares) is taxable as income in the hands of the recipient. This income should be declared under the appropriate heads like “Income from Other Sources” or “Income from Capital Gains,” depending on the nature of the income.
### **Example Scenario**
1. **Gift Received**: If an NRI transfers ₹10 lakhs to his relative in India as a gift, the amount is not taxable in the hands of the relative since it is received from a relative.
2. **Income Earned**: If the relative invests the ₹10 lakhs and earns ₹1 lakh as interest from a bank deposit, this ₹1 lakh interest is taxable as “Income from Other Sources” in the hands of the relative.
### **Key Points to Remember**
- **Gift Exemption**: Gifts from relatives are exempt from tax, but the income generated from the gifted money is taxable.
- **Documentation**: Maintain proper documentation of the transfer, including any communication or proof of the gift to avoid future tax complications.
If there are any specific conditions or circumstances related to the transfer, consulting a tax professional or chartered accountant for personalized advice is recommended.
### **1. Taxability of the Transfer Amount**
- **For the Relative in India**:
- **Gift Tax**: If the amount transferred is in the nature of a gift, it is generally **not taxable** in the hands of the recipient if the amount received is within the limits specified under the Income Tax Act. Under **Section 56(2)(x)** of the Income Tax Act, 1961, if an individual receives a gift from a relative, it is exempt from tax.
- **Definition of Relative**: The term "relative" includes spouse, brother or sister of the individual, or any lineal ascendant or descendant of the individual. If the recipient falls under this definition, the gift is exempt from tax, irrespective of the amount received.
### **2. Taxability of Income Arising from the Transferred Amount**
- **Income from the Gifted Amount**:
- **Taxable in the Recipient’s Hands**: Any income earned from the gifted amount (like interest, dividends, or capital gains) will be taxable in the hands of the recipient. For example, if the relative invests the gifted money and earns interest or capital gains, that income will be subject to tax in the recipient’s hands.
### **3. Sections Relevant to the Taxability**
- **Section 56(2)(x)**: This section deals with the taxation of gifts received from non-relatives. However, if the gift is received from a relative, it is generally exempt from tax under this section.
- **Sub-sections under 56(2)(x)**: These sub-sections outline the conditions under which gifts are considered taxable and the exemptions provided for gifts received from relatives.
- **Section 10(5)**: This section provides exemptions for certain gifts, but the primary reference for gifts from relatives falls under Section 56(2)(x).
- **Income from Investments**: Any income generated from the gifted amount (like interest from a savings account or dividends from shares) is taxable as income in the hands of the recipient. This income should be declared under the appropriate heads like “Income from Other Sources” or “Income from Capital Gains,” depending on the nature of the income.
### **Example Scenario**
1. **Gift Received**: If an NRI transfers ₹10 lakhs to his relative in India as a gift, the amount is not taxable in the hands of the relative since it is received from a relative.
2. **Income Earned**: If the relative invests the ₹10 lakhs and earns ₹1 lakh as interest from a bank deposit, this ₹1 lakh interest is taxable as “Income from Other Sources” in the hands of the relative.
### **Key Points to Remember**
- **Gift Exemption**: Gifts from relatives are exempt from tax, but the income generated from the gifted money is taxable.
- **Documentation**: Maintain proper documentation of the transfer, including any communication or proof of the gift to avoid future tax complications.
If there are any specific conditions or circumstances related to the transfer, consulting a tax professional or chartered accountant for personalized advice is recommended.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- TWO FIRM NAME IN ONE GST NUMBER
- ITR -1 Filing
- Form 16 Issues
- SEA GOING ALLOWANCE
- SALES MADE THROUGH E COMMERCE OPERATOR 9(5)
- Transfer of Rectification Rights to the Jurisdictional Assessing Officer
- Treatment of Profit on sale of fixed assets
- Procedure and Documents Required for Release of FD from DVAT
- Transfer of rectification rights to ao
- IGST Refund pending since June 2022.
- CHANGE IN PARTICULARS OF DIRECTOR
- Non- payment of GST on supply of services- reg
- Accumulated surplus exceeding 15%
- Different GST Number MEESHO
- Fees amount transfer procedure for two doctors
- Notice u/s 148 of IT Act
- REGARDING PERALLEL PROCEEDINGS CAN MOVE TOGETHER FOR SAME MATTER
- SUPPLY TO SEZ UNIT UNDER EPCG LICENCE
- REGARDING TAXABILITY OF ULIPs
- Head office to Branch
Trending Online Classes
CAclubindia
