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Money gifted to certain relatives isn’t taxed in their hands

Definition of relative includes spouse, siblings, siblings of the spouse and so on

How do I show my US savings, which I deposit in my account in India? What documents will I be required to present that the money I have in my bank account in India (not a non-resident Indian account) is generated from my US savings and is not taxable?

Any income earned out of sources in the US would generally not be taxed in India except in a case where the recipient is a resident of India for Indian income tax purposes. I am presuming that you are a non-resident Indian (NRI) for income tax purposes in India and the income that has been transferred into your savings bank account has been received by you in the US and has already been taxed over there. The transfers of such income to your Indian bank account would not be liable to tax in India.

In order to prove that the amount was transferred from your US savings, you could keep a copy of the bank correspondence of the transaction(s). Added to this, in order to demonstrate that the income that has been transferred is earned outside India, you should maintain sufficient documentation to support the source of income.

For instance, in case the amount transferred represents savings from salary income, documents such as pay slips, employment letters, and so on, could be maintained. Apart from these, the tax returns filed with the US tax authorities and the tax payment receipts would also demonstrate that such income has already been offered to tax in the US.

If an NRI gifts money to her relative in India from her non-resident ordinary (NRO) account in India, does she have to pay gift tax?

Where any individual receives money in excess of Rs.50,000 in any financial year without any consideration, such money will be taxed as ‘income from other sources’ in the hands of the recipient.

However, this rule does not apply to money received by any relative, the definition of which includes spouse, brother, sister, brother or sister of the spouse, brother or sister of either of the parents, any lineal ascendant or descendant of yourself or your spouse.

Therefore, a gift to your relative in the form of money, covered within the above mentioned rule would not be taxable. However, a gift given to any other relative would not fall within the exemption and would be taxable in the hands of the relative.

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