Gifts and Inheritance in India: Tax Rules for NRIs, Relatives and Heirs

Families with roots in Pune, Hyderabad or Ahmedabad and children in Illinois move money, jewellery and property across the ocean all the time, and they ask the same two questions: is a gift taxed, and is an inheritance taxed? Gifts and inheritance in India are governed by the income tax law for the recipient, by FEMA for cross-border transfers and by the states for stamp duty. In short, a receipt from a defined relative, under a will, or by inheritance is not taxed on receipt, but later sale of what you receive is. Gifts from friends and cousins above a threshold are taxed in the recipient's hands.

When are gifts and inheritance in India taxable?

Section 92(2)(m) of the Income-tax Act, 2025 treats these receipts as "income from other sources" when the recipient takes them from any person without adequate consideration:

• Money exceeding ₹50,000 in total during the tax year: the whole sum is taxable.
• Immovable property received without consideration with a stamp duty value above ₹50,000: the stamp duty value is taxable.
• Immovable property bought for less than the stamp duty value: the difference is taxable if it exceeds the higher of ₹50,000 or 10% of the price.
• Other property (shares and securities, jewellery, art, bullion, virtual digital assets) received for nothing with aggregate fair market value above ₹50,000: the whole value is taxable; if bought for less than fair value, the shortfall above ₹50,000.

The same rule existed under the 1961 Act for FY 2025-26, and CBDT says the 2025 Act brings no new tax. Only the figures for the year you receive the gift matter.

Which receipts are exempt?

Section 92(3) excludes sums or property received:

For an individual, a "relative" is a spouse; a brother or sister; a spouse's brother or sister; a brother or sister of either parent; any lineal ascendant or descendant (of the individual or the spouse); and the spouse of any of those. Cousins, friends, in-laws not on this list and employers are not relatives. A gift of ₹2 lakh from a cousin in Chicago to a recipient resident in India is fully taxable to the recipient.

FEMA uses a different list: RBI refers to "relative" as defined in section 2(77) of the Companies Act, 2013. Check both lists before you rely on either. Our page on NRI property ownership and FEMA rules covers property gifts.

Is inheritance taxed in India?

Inheritance is not taxed on receipt: section 92(3) excludes sums or property received under a will or by inheritance. India does not have a separate inheritance or estate tax at present and a stand-alone gift tax has not been in force for many years; confirm any change with an Indian lawyer. Four practical points follow:

1. Cost and holding period carry over. If you later sell, section 73 deems your cost of acquisition to be the cost to the previous owner plus improvements, and the holding period includes the previous owner's. A flat held by your mother since 2005 is therefore long-term in your hands on day one.
2. The donor is not taxed on a gift or will. Section 70(1)(b) says a transfer under a will or gift is not a transfer for capital gains.
3. Succession papers are needed. Depending on the state and the family's personal law, an Indian lawyer will advise on legal heir certificates, succession certificates, probate and mutation.
4. Income after inheritance is yours. Rent from an inherited flat is taxable from the date you become the owner; see NRI income taxable in India.

What do FEMA and stamp duty add?

For NRIs and OCIs, RBI's FAQ allows gifts of non-agricultural property from a resident or from a relative who is an NRI or OCI. Inheritance is allowed for any immovable property from a resident, including agricultural land, and from a non-resident who acquired it in line with foreign exchange law. A gift or sale of agricultural land can only be made to a resident.

Rupee gifts: a resident can gift rupees to an NRI or PIO relative within the Liberalised Remittance Scheme limits, and these may be credited to the recipient's NRO account. See the Liberalised Remittance Scheme.

Taking inherited money or sale proceeds abroad: NRIs and PIOs can remit up to USD 1 million per financial year from NRO balances, sale proceeds and assets acquired by inheritance together. RBI approval is needed above USD 1 million. Paperwork is in Form 15CA and 15CB. Stamp duty on a gift deed or transfer is a state subject; rates and exemptions differ in Maharashtra, Telangana, Karnataka, Gujarat and Tamil Nadu, so ask a local lawyer.

Documents to keep

• Gift deed or written declaration, registered where the law requires
• Proof of relationship (birth or marriage certificates)
• Bank advice showing how the money moved, including the donor's source
• Will, death certificate, legal heir or succession papers for inheritance
• Valuation or stamp duty value for property
• PAN of donor and recipient

Worked examples

Gift from a parent. Anand lives in Aurora, Illinois. His father in Chennai transfers ₹30 lakh to Anand's NRO account as a rupee gift, within the father's remittance rules. It is exempt in Anand's hands because it comes from a relative. Anand keeps the gift declaration and the bank advice, which will help if the payment shows up in AIS.

Gift from a cousin. Priyanka, resident in Delhi, receives ₹2 lakh from a cousin in Chicago. A cousin is not a relative under section 92, so the whole ₹2 lakh is taxable to Priyanka as income from other sources.

Inherited flat. Meera inherits a Bengaluru flat from her mother, a resident, in 2026. There is no tax on receipt. She sells in 2028; her cost is her mother's purchase cost and the holding period includes her mother's years, so the gain is long-term.

Mistakes to avoid

• Assuming cousins and friends count as relatives.
• Splitting a cash gift across years or donors to stay under ₹50,000 without considering the total in the year.
• Forgetting FEMA when the asset is agricultural land.
• Overlooking that stamp duty and registration on gift deeds is a state subject.
• Not keeping proof of the donor's source for large gifts.

U.S. side

A gift or bequest from a nonresident alien or foreign estate is not U.S. income, but a U.S. person who receives more than $100,000 in a year from a nonresident alien individual or foreign estate must report it on Form 3520, aggregating related donors. A U.S. citizen or resident who gives to relatives in India may owe a gift tax return if the gift exceeds the annual exclusion, which is $19,000 per recipient for both 2025 and 2026 (a return does not always mean tax is due). Indian assets also form part of a U.S. person's worldwide estate. See Forms 3520 and 3520-A, cross-border gifts and estate comparison and US-India estate and succession planning.

How we can help

For families in Aurora and the Fox Valley, our CPA firm prepares Form 3520, gift tax returns and the U.S. side of an Indian inheritance, and coordinates with your Indian CA and family lawyer, who handle Indian tax, succession and stamp duty. We do not give legal or Indian succession advice. See cross-border tax for India, Canada and USA and individual tax returns for newcomers and NRIs. The rest of the series is on the India hub.

Frequently asked questions

General information only. It is not tax, legal, accounting or immigration advice for your situation, and rules change; confirm the current rules with the official source or a licensed professional in the relevant country.