Sending maintenance amount to parents by children working abroad is particularly prevalent amongst Non Resident Indians (NRIs).
If you live abroad and send money to your parents for their own maintenance then it is not seen as income of your parents.
Let's consider the example of Mohit, who works and resides in the US and sends Rs 20,000 per month to his mother, in India so that she can take care of her personal expenses.
In this case, the amount of Rs.20,000 will not be considered as income earned by the mother. Rather, it will be considered as gift to his mother.
Therefore, it's imperative to understand more about Gift Tax Act in India including its rules and exemptions. Gift Tax Act was imposed buy Indian Parliament and enacted to impose tax on those who give or receive gifts under certain circumstances as specified by the Act.
According to section 56(2) of Gift Tax Act any sum of money exceeding Rs.50,000 received without consideration by an individual or a Hindu Undivided Family (HUF) is chargeable to tax as income from other sources.
However, some gifts are tax exempted. Gifts which are not taxable are the ones received from your 'close' relatives. 'Close' relatives is defined as:
- Parents siblings and their spouse
- Spouse of siblings
- Daughter and son
- Spouse of daughter and son
- Spouse's parents
- Spouse's siblings and their respective spouse.
So, in case of Mohit, his mother falls under the category of 'close' relative and therefore she does not have to pay taxes on the money she receives every month from her son living abroad. The whole amount will be exempted from tax and not considered as her income.
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So, Non Resident Indians who have parents living in India can send money to their parents as gifts without worrying about tax payment.