A son in Dubai sends money to his parents in Thane; a father in Mumbai funds his daughter's flat in Dubai; a brother gifts his sibling the deposit for a business. These are ordinary family transactions, and each one crosses two tax systems and one exchange-control regime. Most are entirely tax-free if done the right way round. This note sets out the rules as they stand from 1 April 2026.
Quick answer
- LRS limit USD 250,000: A resident individual may remit up to USD 250,000 per financial year under the Liberalised Remittance Scheme for permitted purposes, including gifts, maintenance of relatives, education and property abroad.
- 20% TCS above ₹10 lakh: From 1 April 2026, TCS on gifts, maintenance, property and investment remittances is 20% on the amount above ₹10 lakh in the year, and is fully creditable or refundable.
- Gifts from relatives tax-free: A gift from a UAE relative to a resident in India is not income under section 92 (56(2)(x) of the 1961 Act), whatever the amount, but should be documented with a gift deed or letter.
- Non-relative gifts taxable: Gifts above ₹50,000 in a year from a resident to a non-relative non-resident are taxable in the non-resident's hands in India under section 9 (9(1)(viii) of the 1961 Act), subject to any treaty relief.
Sending money out of India: the LRS
A resident individual may remit up to USD 250,000 per financial year under the Liberalised Remittance Scheme for permitted purposes — gifts, maintenance of relatives, education, medical treatment, travel, purchase of property abroad, and investment in foreign shares and deposits. Minors may remit through a guardian and family members may pool their limits for a single purpose such as a property purchase, provided each is a co-owner. Remittances for margin trading, lottery and to countries identified by FATF as non-cooperative are prohibited. The bank files the remittance under the purpose code you declare; the declaration is what the tax department later matches against your return.
TCS on the way out
| Purpose | TCS rate from 1 April 2026 | Threshold |
|---|---|---|
| Education funded by an education loan under section 129 (80E of the 1961 Act) | Nil | — |
| Education (own funds) and medical treatment | 2% | On the amount above ₹10 lakh in the year |
| Overseas tour package | 2% | From the first rupee |
| All other purposes — gifts, maintenance, property, investments | 20% | On the amount above ₹10 lakh in the year |
The ₹10 lakh threshold is cumulative across all purposes other than tour packages. TCS is not a tax: it is collected by the bank, appears in your Form 26AS, and is fully creditable against your income tax liability or refundable in the return. A salaried remitter can ask the employer to adjust it against TDS. The practical cost is cash flow — 20% locked up until the refund — which argues for timing large remittances early in the financial year and filing the return promptly.
Gifts from a UAE relative to a resident: tax-free
Money or property received without consideration is taxable in the recipient's hands under section 92 (56(2)(x)) if it exceeds ₹50,000 in a year — unless it comes from a relative. The definition covers spouse, parents, siblings and their spouses, lineal ascendants and descendants and their spouses, and the same relatives of the spouse. A gift from an NRI son to his parents, or from a brother in Dubai to a sister in Mumbai, is therefore not income for the recipient, whatever the amount. It should be documented with a simple gift deed or letter, credited from the NRI's NRE or foreign account to the resident's account, and the recipient should keep the evidence because the bank credit will appear in the Annual Information Statement. Income later earned on the gifted money — interest, rent — is taxable in the recipient's hands, except that income on a gift to a spouse or minor child is clubbed back to the donor.
Gifts from a resident to a non-resident
A resident may gift to an NRI relative under LRS, subject to the USD 250,000 limit and 20% TCS above ₹10 lakh. Gifts to a non-relative non-resident are taxable in the non-resident's hands in India under section 9 (9(1)(viii)) — a rule introduced to stop untaxed transfers abroad — and the donor should expect questions if the remittance purpose is "gift" to someone outside the family. A resident may also gift rupees into an NRI relative's NRO account without any remittance at all.
Buying a Dubai flat from India
Property abroad is a permitted LRS purpose. A family can pool limits, remit over more than one financial year, or combine a resident member's LRS remittance with an NRI member's own funds. The 20% TCS applies to the remittance above ₹10 lakh. Once bought, the property is a foreign asset to be reported in Schedule FA every year by each resident co-owner, and any rent is taxable in India at slab rates with a 30% standard deduction, with no UAE tax to credit. A mortgage from a UAE bank is permitted; a loan from an Indian bank for property abroad generally is not. The purchase does not create any ODI reporting because immovable property is not a foreign entity.
The mistakes
Routing a gift through a friend's account to avoid TCS, declaring an investment as "maintenance of relatives", using LRS to fund a foreign company without the ODI filing, and forgetting that a resident who receives a large credit from abroad must be able to show the relationship and the gift deed when the AIS notice arrives. Each of these turns a tax-free transaction into a compounding application or an assessment.
Questions we are asked
Is TCS charged on money sent abroad from India for education? Nil where the education is funded by an education loan under section 129 (80E). From 1 April 2026, education from own funds and medical treatment attract TCS of 2% on the amount above ₹10 lakh in the year.
Is the ₹10 lakh TCS threshold on LRS remittances per purpose or combined? Combined. The ₹10 lakh threshold is cumulative across all purposes other than overseas tour packages, which attract 2% TCS from the first rupee.
Do I need to report a Dubai flat bought from India in my Indian tax return? Yes, if you are resident and ordinarily resident. A Dubai flat is a foreign asset that each such co-owner reports in Schedule FA every year, and any rent is taxable in India at slab rates with a 30% standard deduction. The purchase does not create ODI reporting.
Is interest on money gifted by an NRI son taxable for his parents in India? Yes. Income later earned on gifted money, such as interest or rent, is taxable in the recipient's hands, although income on a gift to a spouse or minor child is clubbed back to the donor.
We document it properly
Gift deeds, LRS declarations with the correct purpose code, TCS credit in the return and Schedule FA disclosure — for both sides of the family. Income tax services or contact us.
Disclaimer
This note is for general information and knowledge purposes only. It describes the position as at 16 October 2026 and is not legal, tax or professional advice. Tax law changes frequently; please confirm the current position with us before acting.
Tax, GST and business setup advisors — Mumbai and Thane. Contact us to discuss your situation.
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