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How much money can NRIs gift to parents in India?

Posted on 30 Jul 2023
Author: Sayan Sircar

Tags: NRI ; Tax

6 mins read
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This article covers the mechanics for NRIs to regularly send or make one-time large gifts of money to parents in India.

How much money can NRIs gift to parents in India?

This article is a part of our detailed article series on the concept of gifting assets and investing in the name of your relatives. Ensure you have read the other parts here:

Who should invest in the name of parents to save tax? Who should not?

This article discusses a common tax saving technique of investing in the name of parents to save tax. We also look at the pros and cons.

Income clubbing: Are you trying to save tax by investing in the name of your parents or wife?

This article explains the concept of income clubbing. It shows how tax saving by investing in the name of family members may not save tax.

Gift tax exemption rules: who can receive gifts from relatives that are tax-free?

This article tells you who all can receive gifts of cash, shares, property or any other assets from you without paying any gift tax.

Disclaimer: Taxation is a dynamic concept, and the content of this article is valid on the date of publication and any subsequent updates. Always consult a professional tax advisor before doing anything that leads to taxes being due.

📚 Table of Contents

Is sending money to parents in India tax-free for NRIs?
Remittance of large amounts is automatically reported
NRIs based out of the US
NRIs based out of other countries except the US
Why should NRIs remit money to their parents in India?
Can NRIs save taxes by investing in the name of their parents in India?

Is sending money to parents in India tax-free for NRIs?

First, as blood relatives, parents do not have to pay taxes when they receive money from their children, NRI or residents. Any income from that income, say as FD interest, becomes a part of the parent’s income in the future and might be taxable to the parent.

With that out of the way, here are some general rules:

large transactions, as well as several smaller ones in quick succession, are automatically reported to the tax authorities
there is no tax on the parent in India
there might be a tax on the NRI sending money to India

We are only discussing remittance via legal banking channels. Carrying cash has its own set of limitations and required declarations that are not within the purview of this article.

An implicit assumption here is that the money being transferred is post-tax. If not, there are obviously taxes due on it to be paid in the NRI’s country of residence.

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Remittance of large amounts is automatically reported

Your sending bank will automatically report large amounts remitted to India to the income tax authorities in your respective countries. For example,

in the USA, any remittance above USD10,000 will be reported to the IRS
in Canada, any remittance above CAD10,000 will be reported both to the CRA and FINTRAC
in the UK, any remittance above GBP10,000 will be reported to the HMRC etc

There are generally no upper limits to the amount that can be transferred.

To understand how much NRIs can gift their families in India:

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NRIs based out of the US

NRIs in the US must pay additional tax if they:

remit an amount greater than the annual exemption limit to their parents in India
the tax-free remittance limit is offset against the lifetime Gift and Estate Tax Exemption limit

The latest rules are here: How can NRIs in the US gift money to their parents in India?

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NRIs based out of other countries except the US

NRIs in countries other than the US do not have to pay taxes on remittances to India.

Why should NRIs remit money to their parents in India?

Uses of this gifting process could be:

How can NRIs easily manage their parents’ finances in India where NRIs gift money to their parents in India to manage their day-to-day expenses
Investing in India in the name of their parents to reduce their globally taxable income
Purchase property in India in the name of parents to create rental income for them

Warning: Money sent to parents becomes part of the parent’s assets. At the time of death, others like the siblings of the NRI child might make a claim against these assets. We have discussed this point in detail here: Who should invest in the name of parents to save tax? Who should not?

Can NRIs save taxes by investing in the name of their parents in India?

There are two caveats: the gifts to the parents for investment purpose become the assets of the parents and can cause issues during transmission back to the child. Also, there are tax reporting considerations like FATCA that need to be understood: Who should invest in the name of parents to save tax? Who should not?.

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