Sending Funds to NRI Children: Under the current income-tax rules, a gift from a parent to a daughter is treated as a gift from a relative. That means the money is not taxed in the daughter’s hands in India. The law says money received from a relative is not taxed, and the definition of “relative” includes a lineal ascendant or descendant, which covers a parent and child relationship. So a gift of ₹25 lakh from a parent to an NRI daughter does not create income-tax liability for the daughter in India.
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How does TCS apply?
Even though the gift is not taxed for the daughter, the transfer still falls under the Liberalised Remittance Scheme. RBI says a resident individual may make a rupee gift to a close NRI relative by electronic transfer, and the amount goes to the NRI’s NRO account.
RBI also says this gift has to stay within the LRS limit for the year. The income-tax department’s current TCS rules say remittances under LRS for purposes other than education or medical treatment attract 20% TCS on the amount above ₹10 lakh in a financial year. So for a ₹25 lakh remittance, TCS would apply on ₹15 lakh, which is the part above the ₹10 lakh limit.
What happens with the Tax later?
TCS is not the final tax on the gift. It is only tax collected in advance. The income-tax department says TCS becomes part of the taxpayer’s tax credit, and Form 26AS reflects that credit.
If too much tax is collected, the excess can be claimed back as a refund when the return is filed. So the TCS amount is not lost money. It can be set off against the final tax due or taken back as a refund, depending on the full tax situation for that year.
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NRO Account Transfer
If the gifted money is sent to the daughter’s NRO account, RBI still treats it as an eligible credit to that account when the gift is from a close relative. The main point is that the family gift itself is not taxable income for the daughter, but the outward remittance from the parent can still bring LRS and TCS rules into play.
