Gift giving to relatives?

Question

I have searched the net and found good information about taxes on gift givings to relative back home in India. I wanted to make sure my understanding is correct.

If I use a NRE account as the source account for transfer, I can send the money to anyone in India (close relative or not) and it is a tax free transfer. The person receiving the money will not pay any taxes on receipt amount.

If I use any other mechanism including ICICI money2india, it is considered a taxable transfer i.e. the tax needs to be paid on the transfer amount. The only exceptions are if the recipient is close relative i.e. brother sister, mom, dad. In that even no taxes would need to be paid on transfer

Another related question is taxes on interest earned by a NRI.
I am liable to pay taxes only if the income is above 1.5 lacs in India. Below 1.5 lac, I am not required to file a income tax return until unless bank has withheld my taxes at source.

Is my understanding correct.

Thanks
SS

Additional Details

Here is a link that talks about NRE account as source
http://in.answers.yahoo.com/question/index;_ylt=AjoCQSGzJ2Ltk51Q5_s58NW5HQx.;_ylv=3?qid=20080126041612AA8ogc6

Additionally, is there no limit on how much can you give to close relative without getting into tax situation? I would think it can not be such open ended

Answer 1

Best Answer - Chosen by Voters

How can the source account or any other mechanism for transfer affect the Gift Tax?

Any stranger receiving more than Rs 50000/- from you, as gift, is liable for Gift Tax.

Gift, in cash or kind, to close relatives do not attract tax.

The exempted income limit is Rs 1.6 lakhs.

HMT

Answer 2

Relatives can get any amount of money as gift but make sure that
documentary evidence is there,like cheque,affidavit etc.The person getting the gift can be asked to prove its a bonafide gift and not a case of money laundering.The person getting the money will pay tax if his income exceeds the taxable limit.
About your Indian income,your presumption is largely correct.If you claim refund of the tax deducted you will have to file the return,unless you are willing to forego the tax deducted.

Source(s):

Experience

Answer 3

U can gift anything to any person who is from ur family called as close relative can be given any amount of cash or kind without any deduction of Taxes
But other than dese persons u r liable to pay Tax called gift tax.
(In ur case it can be from any a/c too no expections r present).

An NRI If earns income in India is liable to tax wen his income is above 1.6 lacs