Money gifts to NRIs become taxable
Change in the gifting policy
With the passing of the Finance Bill 2019 in Parliament, some changes have been made in the rule regarding the taxation of gifts given by resident individuals to non-resident Indians (NRIs). Amendments at the time of passing of Budget 2019 have specifically defined the 'person outside India' as a non-resident or foreign company.
Money transfers become taxable
According to changes made at the time of passing Budget 2019, only money paid by a resident individual to a 'person outside India without any consideration will be considered as taxable in the hands of the receiver'. The changes will be applied for all such transfers made on or after July 5, 2019.
Gifts to whom will not attract tax
The specified relatives list in terms of Section 56 of the Income Tax Act is fairly wide. It includes brothers and sisters, and their spouses. Gifts to this category will not attract any tax. But acquaintances, friends, and other close family relations would come under the purview of the tax.
Why the changes were made
In India, gifts are taxed in the hands of the recipient. However, gifts to NRIs were claimed to be accrued abroad and hence remained outside the tax net. Therefore, changes have been made to plug this loophole.