Those who have received money for the first time from their children living abroad could be in a dilemma about whether the funds received from them are taxable. However, as per the Income Tax Act, 1961, money received from children, defined as ‘relatives’, is not taxable.

Aastha Dhowan, partner at N.A. Shah Associates, says, “Children are covered by the definition of relative as per Income-tax Act. So any amount received from them as a gift will not be chargeable to tax”.

Who Are Considered Relatives For The Purpose Of Income Tax?

Relatives defined under the Income Tax Act are the spouse of the individual, the brother or sister of the individual, brother or sister of the individual’s spouse, brother or sister of either of the individual’s parents, the individual’s lineal ascendant or descendent, and the spouses of these aforesaid persons are considered relatives. So any gift received from them is not taxable in the hands of the individual. There is also no limit on the transfer amount from children.

Whatever the amount or the frequency, it is tax-free for the receiver if it is received from the defined relatives under the Income Tax Act. However, if the income is received from other than the persons defined as ‘relatives’, it is taxable for the receiver if the amount is over Rs 50,000.

Dhowan clarifies, “There is no limit on the fund transfer to parents in India. Gifts from children are tax-free irrespective of the amount. In other cases of gifts, the threshold is Rs 50,000.”

Can One Get Income Tax Queries For Money Received From NRI Children?

Money received from children who are non-resident Indians (NRI) is not taxable, but it may raise questions by the income tax department for the remitter, or your children.

“The same can be red flagged by banks receiving such money; however, there is no current requirement by banks to report such inward remittances”, says Dhowan.

The query from the tax authorities could be about the income source of the remitter abroad. The remitters may be asked to submit proof of their earning to the tax authorities in India to confirm their income source and rule out any suspicions.