1. Gift Tax By NRIs Exempt from Gift Tax
Gift tax in India is payable by the donor, i.e. the person making the gift under the provisions of the Gift Tax Act 1958 only in respect of gift made till 30 September 1998. Gift tax was abolished on gifts made on or after 1 October 1998. This Act extends to the whole of India, except the State of Jammu and Kashmir. Likewise, this Act is also not applicable to the State of Sikkim. Gift tax is payable in respect of assessment year on the taxable gifts made by a taxpayer, i.e. the donor in a previous year relevant to the assessment year. Gift tax is payable on the total amount of all gifts made by a taxpayer during a particular previous year relevant to the assessment year concerned to one or more donees, in excess of the exemption limit and also after excluding other exemptions from gift tax. Thus gift tax is payable on the taxable gift made till 30.9.98. If a non-resident Indian knows these exemptions and makes a gift accordingly, he would not be liable to any gift tax at all under the provisions of the Gift Tax Act.
2. No Aggregation Of Taxable Gifts
Till assessment year 1986-87 there was a provision for aggregating the taxable gift made by a donor along with taxable gifts made by him during the preceding four years. The aggregated taxable gift was thus liable to gift tax at the slab rates of gift tax. From the total gift tax so payable, the gift tax, in any, paid if any of the previous years in respect of the aggregated gifts was then deducted. This provision was contained in Section 6A of the Gift Tax Act. From the assessment year 1987-88 this provision will not be applicable and thus gifts, if any, made in any previous year relevant to the assessment year 1987-88 and onwards would not be liable to aggregation of gifts. Non-resident Indians would find a great deal of relief, particularly where they make gifts in India to their relatives and friends in such a manner that they are exempt from gift tax.
3. Gift Of Immovable Property Situated Outside The Taxable Territories Is Completely Exempt From Gift Tax — Regarding Gift Made Till 30 September 1998
Under the provisions of Section 5(1)(i) of the Gift Tax Act 1958, no gift tax is to be charged in respect of all gifts made by any person till 30 September 1998 (including a non-resident Indian) of immovable property situated outside the territories to which this Act extends. As stated in topic 1, gift tax is not 4pplicable to the State of Jammu & Kashmir and the State of Sikkim. Thus, if any non-resident Indian makes a gift of immovable property situated in Jammu & Kashmir or New York or London he would be completely exempt from payment of gift tax in respect of such gifts of immovable property. In such a case the status of the donee is immaterial, i.e. the recipient of the gift. A non-resident Indian can take full advantage of this exemption and make a gift of an immovable property situated in a foreign country or in the states of Jammu & Kashmir, and Sikkim without being liable to pay gift tax in India. If, however, a non-resident Indian makes any gift of an immovable property situated in India, he would be liable to gift tax as any other person. Gift tax is however, abolished on gifts made after 1 October 1998. This provision is explained by means of an example given below.
C, a non-resident Indian, is an owner of a house property in London which is valued at `. 25,00,000. He makes a gift of the said house to his youngest son. on 8 July 2015 No gift tax would be payable in respect of the value of the house property in London gifted by C to his son.
4. Gifts To Non-Relatives By NRI Is Income
Any gift received by an individual or an H.U.F. from any person including a non-resident Indian in cash or by way of credit in excess of `. 50,000 would be liable to tax as “Income from other sources”. In the case of an individual’s marriage, gifts without any upper limit even from non-relatives would be exempt. Gifts received or credited by an individual from a relative out of natural love would be exempted. So also gifts received or credited by any individual or an H.U.F. under a Will or by way of inheritance or exempted sums will not be taxable as income. For the individual, “relative” would mean his spouse, brother or sister, spouse’s brother or sister, parent’s brother or sister, lineal ascendant or descendant of self or spouse. Spouse of these persons would also be considered as relative. In view of the above provision even the NRI should not make gifts to non-relatives keeping in view the fact that the resident non-relative would be subjected to tax thereon.
From 1-10-2009 even the gifts to non-relatives in the form of shares, jewellery, property, paintings, etc. by an NRI would be treated as income. Similarly, gift of ‘Bullion” to non-relatives on or after 1-6- 2010 by an NRI would be income.