Emigrating Indians have to comply with the various formalities while transferring their residence from India with the intention to become NRI. They should also be conversant with the position of their assets and liabilities in India. This has been briefly explained as under:
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Gifts to Relatives/Friends in India
It is quite natural for NRIs to give gift (generally monetary gifts) to their relatives and friends in India out of natural love and affection. They have to plan their gifts from gift tax, exchange control & import control angles
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No gift Tax on Gifts made on or after 1.10.1998
No gift tax is payable in respect of gifts made on or after 1.10.1998. However, gifts made up to 30.9.1998 would be subject to gift Tax
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Foreign Exchange Remittance
NRIs can effect gifts to relatives by remitting money through banking channels in convertible foreign exchange.
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RBI Waves Forex clearance for Foreigners, NRIs
For convenience of Non-resident Indian (NRIs) visiting India, the Reserve Bank of India has clarified that there is no restriction on NRIs to make payment to any position resident in India, including friends and relatives, in travelers cheques or foreign currency or cheques drawn on banks abroad (subject to realization) for services rendered or goods sold or in settlement of any lawful obligation. No specific permission is required from the Reserve Bank for this purpose (cf. Notification No. FERA 158/94-RB, dated February 24, 1994 as amended up to July 22, 1997). This facility is also available to foreigners visiting India.
After receiving foreign currency, travellers cheques, etc., however, the residents would have to sell it to an authorised dealer within seven days. Residents are permitted to hold foreign currency up to US $ 2,000 or its equivalent including currencies held for numismatic purposes.
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Foreign Exchange Assets
The Foreign Exchange Assets are identified in Section 115 C of the Income Tax Act. An NRI can gift any foreign exchange asset (shares, deposits, etc.) on which concessional tax treatment (under Chapter VIA of the Income Tax Act is available.
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Gift of Specified Bonds
NRI bonds issued by the State Bank of India in 1988 and India Development Bonds can also be gifted.
While noting the above it is vital that these NRI Bond holders can claim gift tax exemption even in a subsequent year when they become residents.
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Gifts Under Import Policy
A gift to friends and relatives in India can be made without obtaining any customs clearance permit, subject to following conditions:
- Gift is made for donee's personal use,
- Gift is made by post or otherwise.
- C.i.f. value of the gift parcel does not exceed Rs.2,000 and it does not contain vegetable seed exceeding one lb. In weight, bees, tea, books, magazines and journals and literatures which are not permitted to be imported, canalized items, alcoholic beverages, and consumer electronic items (except hearing aids and life saving equipments, apparatus and appliances and parts thereof);
- Gift of consumer goods to charitable, religious or educational institutions and such persons as may be specified or otherwise approved by the Central Government.
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Gifts Permitted under Baggage Rules, 1998
Import of gifts is generally permitted according to the Baggage Rules, 1998. These rules provide for exemption from duty on gifts imported by tourist of foreign origin/Indian origin subject to certain conditions and limitations.
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Gifts not Covered under Baggage Rules, 1998
Import of goods which are otherwise freely importable are also permitted as import of gifts without a Customs Clearance Permit (CCP). In any other case a customs clearance permit is required. The customs clearance permit is issued on an application by the Licensing Authority, after considering the merits of the case.
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Application for CCP
An application for grant of CCP of import of gifts of items appearing in Negative List of Imports may be made to Director General of Foreign Trade. New Delhi in the prescribed form (i.e. Appendix VIII of the Handbook & Procedures 1997-2002) supported by the following documents:
- Donor's letter in original;
- Self-certified copy of proforma invoice;
- Bank receipt in duplicate/demand draft in payment of application fee.
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Exemption from Customs Duty
In terms of Notification No.171/93 Cus., dated 16.9.1993 as amended by 100/95-Cus., dated 26.5.1995, gifts imported by post or as air freight up to a value of Rs.2,000 are exempt from Customs Duty. Postal charges or the air freight shall not be taken into account for determining the value limit of Rs.2,000.
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Exchange Control Regulations & Gifts
Gifts of foreign currency amounts from abroad
Donee should address a letter to the donor requesting to remit the gift amount through registered post or authorize an overseas bank to receive the gift on his behalf from the donor and remit the same to his banker in India. Donor should accordingly gift the amount and also instruct his banker to issue a certificate certifying that amount has been paid from out of donor's account against adequate balance. If gift received is in foreign exchange then donee should surrender the same to his banker in India within 30 days of receipt of such gift. Donee should obtain 'Inward Remittance Certificate' from his banker inviting all details certifying that remittance received is a gift. A copy of the said certificate should e provided to the donor. In case gift is received by post, the postal wrapper should be kept intact for record and for future reference.
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