Money transfer
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
08 July 2013
A person is working in USA... and pays tax in USA.... He sends money to India. Is that money taxable to an India to the receiptant. What is the provision in IT rules in the matter NRI sending money to India...
Querist : Anonymous
Querist :
Anonymous
(Querist)
09 July 2013
PLEASE GUIDE
03 August 2024
In India, money received from abroad, including from Non-Resident Indians (NRIs) working overseas, is generally not taxable as income in the hands of the recipient in India, provided it is not considered as income earned in India. Here’s a detailed overview of the provisions regarding money transfer and taxation:
### **Tax Provisions for Money Transferred by NRIs**
1. **Nature of Transfer:**
- **Gift or Remittance:** If the money transferred is considered a gift, it may be subject to tax under the Income Tax Act in India, specifically under the head of "Income from Other Sources," if it exceeds the threshold limit of ₹50,000 per financial year. However, gifts received from relatives (including NRIs) are exempt from tax.
- **Income:** If the transferred money is income earned by the NRI, the taxation of this income is subject to the tax laws of the country where the income was earned (in this case, the USA).
2. **Relevant Provisions in the Income Tax Act, 1961:**
- **Section 56(2)(x):** This section deals with taxation of gifts and specifies that any sum of money exceeding ₹50,000 received from a person other than a relative is taxable as income. However, gifts from relatives are exempt under this section.
- **Section 10(38):** This section provides exemptions for long-term capital gains on the transfer of equity shares or units of an equity-oriented mutual fund, but this is not directly related to money transfer from NRIs.
- **Section 10(23C):** Addresses income of certain charitable or religious institutions, which is not directly relevant to individual money transfers.
3. **Reporting Requirements:**
- **Income Tax Return Filing:** The recipient in India must report the amount received if it is above the specified threshold for gifts and if it is taxable under Section 56(2)(x). For general remittances, if it’s not income but personal funds or gifts, reporting in the Income Tax Return is not mandatory but is advisable for clarity.
- **Foreign Remittance Form (Form 15CA/15CB):** In cases where a remittance is sent to an NRI from India and involves certain tax implications or if required under the Foreign Exchange Management Act (FEMA), Form 15CA and Form 15CB might be required. These forms are declarations related to the remittance and the tax paid or payable.
4. **FEMA Regulations:**
- **Foreign Exchange Management Act, 1999 (FEMA):** Under FEMA, there are regulations on the foreign exchange remittance from India. However, receiving money into India from abroad generally does not have specific FEMA reporting requirements for individuals unless it involves large sums or specific categories of transactions.
### **Practical Advice**
- **For NRIs Sending Money:** Money sent by NRIs to India is generally not taxable in India as income in the hands of the recipient. However, if the money is substantial or there are specific circumstances, it is advisable to keep documentation to prove the source and nature of the funds.
- **For Recipients in India:** If the money received is substantial, it is wise to ensure proper documentation and, if needed, consult with a tax advisor to ensure compliance with Indian tax laws and to address any specific tax implications.
### **Conclusion**
Money transferred by an NRI to an individual in India is not typically taxable as income for the recipient in India, provided it is not considered as a taxable gift exceeding ₹50,000 from a non-relative. However, it is essential to maintain proper records and be aware of reporting requirements for large sums or specific circumstances. For personalized advice, consulting with a tax professional or legal advisor is recommended.
### **Tax Provisions for Money Transferred by NRIs**
1. **Nature of Transfer:**
- **Gift or Remittance:** If the money transferred is considered a gift, it may be subject to tax under the Income Tax Act in India, specifically under the head of "Income from Other Sources," if it exceeds the threshold limit of ₹50,000 per financial year. However, gifts received from relatives (including NRIs) are exempt from tax.
- **Income:** If the transferred money is income earned by the NRI, the taxation of this income is subject to the tax laws of the country where the income was earned (in this case, the USA).
2. **Relevant Provisions in the Income Tax Act, 1961:**
- **Section 56(2)(x):** This section deals with taxation of gifts and specifies that any sum of money exceeding ₹50,000 received from a person other than a relative is taxable as income. However, gifts from relatives are exempt under this section.
- **Section 10(38):** This section provides exemptions for long-term capital gains on the transfer of equity shares or units of an equity-oriented mutual fund, but this is not directly related to money transfer from NRIs.
- **Section 10(23C):** Addresses income of certain charitable or religious institutions, which is not directly relevant to individual money transfers.
3. **Reporting Requirements:**
- **Income Tax Return Filing:** The recipient in India must report the amount received if it is above the specified threshold for gifts and if it is taxable under Section 56(2)(x). For general remittances, if it’s not income but personal funds or gifts, reporting in the Income Tax Return is not mandatory but is advisable for clarity.
- **Foreign Remittance Form (Form 15CA/15CB):** In cases where a remittance is sent to an NRI from India and involves certain tax implications or if required under the Foreign Exchange Management Act (FEMA), Form 15CA and Form 15CB might be required. These forms are declarations related to the remittance and the tax paid or payable.
4. **FEMA Regulations:**
- **Foreign Exchange Management Act, 1999 (FEMA):** Under FEMA, there are regulations on the foreign exchange remittance from India. However, receiving money into India from abroad generally does not have specific FEMA reporting requirements for individuals unless it involves large sums or specific categories of transactions.
### **Practical Advice**
- **For NRIs Sending Money:** Money sent by NRIs to India is generally not taxable in India as income in the hands of the recipient. However, if the money is substantial or there are specific circumstances, it is advisable to keep documentation to prove the source and nature of the funds.
- **For Recipients in India:** If the money received is substantial, it is wise to ensure proper documentation and, if needed, consult with a tax advisor to ensure compliance with Indian tax laws and to address any specific tax implications.
### **Conclusion**
Money transferred by an NRI to an individual in India is not typically taxable as income for the recipient in India, provided it is not considered as a taxable gift exceeding ₹50,000 from a non-relative. However, it is essential to maintain proper records and be aware of reporting requirements for large sums or specific circumstances. For personalized advice, consulting with a tax professional or legal advisor is recommended.
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