23 January 2024
Sir, A NRI individual wants to transfer some amount say Rs 9 lacs from his NRO a/c to his resident parents here for their maintenance and well being. Hence queries :-
1. Is there any upper limit up to which he can give funds from NRO a/c to his parents for their use ? 2. Will the receiving parent be required to show this receipt while filing their ITR ? 3. Is there any requirement to create any formal gift deed for this transaction ? 4. Will there be any requirement to create gift deed if amount for transfer to parent is even more say upto Rs20 lakhs .? 5. Will there be any requirement to create evidence of transaction which otherwise is already a bank transfer only.?
06 July 2024
Here are the answers to your queries regarding transferring funds from an NRO account to resident parents:
1. **Upper Limit for Transfer**: There is no specific upper limit imposed by the RBI for transferring funds from an NRO account to resident parents. However, the transfer should be for legitimate purposes and within the permissible transaction limits set by the bank.
2. **Income Tax Reporting by Parents**: - If the funds transferred to the parents are treated as a gift, the receiving parent needs to disclose it in their income tax return (ITR) under the head "Income from Other Sources" if the amount exceeds Rs. 50,000 in a financial year. - If the transfer is for maintenance and well-being and not considered a gift (which might require a legal interpretation based on the purpose and documentation), it may not necessarily be taxable in the hands of the parents.
3. **Requirement of Gift Deed (for Rs. 9 lakhs)**: For amounts transferred up to Rs. 20 lakhs, a formal gift deed is not mandatory under Indian tax laws. However, to establish the intent and purpose of the transfer, it's advisable to have documentation specifying that the transfer is for maintenance and well-being of the parents.
4. **Requirement of Evidence**: While a bank transfer itself serves as evidence of the transaction, additional documentation (like a purpose statement or letter) stating that the transfer is for the parents' maintenance can be helpful to clarify the nature of the transaction.
5. **Higher Amount Transfers (up to Rs. 20 lakhs)**: - Even for higher amounts (up to Rs. 20 lakhs), the necessity of a formal gift deed remains optional but recommended for clarity and to avoid any future disputes. - Ensure that the purpose of the transfer is clearly documented to substantiate that it's for the benefit of the parents.
It's always advisable to consult with a tax advisor or a legal expert to ensure compliance with tax regulations and to structure the transaction appropriately based on individual circumstances.
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