1 week ago
Overseas Property Transfers for NRI Children: Limits and Tax Rules
Parents in India may send money to help their NRI or OCI child buy property in another country.
Each eligible resident parent can generally use a yearly remittance limit of $250,000 under the RBI’s LRS rules.
Two eligible parents may therefore have a combined limit of $500,000 in one financial year.
The money should be clearly described as either a gift or a loan.
A gift does not have to be repaid, while a loan should include repayment terms.
Parents must provide forms and documents showing where the money came from and how it will be used.
Banks may collect TCS when LRS transfers exceed ₹10 lakh in a financial year.
Families must also budget for currency-conversion costs and receiving-bank charges.
Resident individuals can remit up to $250,000 each financial year under the RBI’s Liberalised Remittance Scheme (LRS).
Two eligible resident parents may potentially use separate limits, totaling up to $500,000 per financial year.
Parents should document the contribution as a gift if repayment is not expected, or as a loan if repayment is intended.
LRS remittances exceeding ₹10 lakh in a financial year may attract Tax Collected at Source (TCS) at 5% or 20%, depending on the purpose.
Transfers should go through an Authorised Dealer bank with Form A2, PAN, source-of-funds evidence and other required documentation.
- Who
- Resident Indian parents transferring funds to help an NRI or OCI child purchase property abroad.
- What
- A transfer of money for an overseas property purchase under FEMA and the RBI’s LRS rules.
- Where
- Funds must be remitted through an Authorised Dealer bank for property located abroad.
- When
- During a financial year, which runs from 1 April to 31 March; unused LRS limits cannot be carried forward.
- Why
- To help the child buy overseas property while complying with foreign-exchange, tax, documentation and banking requirements.
Key facts
- Individual LRS limit
- Up to $250,000 per resident individual per financial year.
- Potential two-parent limit
- Two eligible resident parents may have separate limits totaling up to $500,000 per financial year.
- Eligible users
- Resident individuals; companies, partnership firms, HUFs and trusts cannot use LRS.
- Gift treatment
- A gift from a parent to an individual child is exempt from Indian income tax for the child, regardless of amount.
- TCS threshold
- LRS remittances exceeding ₹10 lakh in a financial year may attract TCS at 5% or 20%, depending on the purpose.
- Required process
- Remittance through an Authorised Dealer bank, with Form A2 and PAN for LRS transfers.
- Additional costs
- Exchange-rate spreads, currency-conversion margins and receiving-bank charges may apply.
Sources
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