Money and relationships: what are the tax implications if my daughter sends me money from abroad?

If you live and work in a foreign country while your retired and elderly parents are in India, it can be an emotionally stressful situation for both of you. While there isn’t much you can do about their status other than visit as often as you can, what you can do to help them with their retirement is provide them with financial support. But is it legally permissible to send them money from a foreign country? If so, how much can you send? More importantly, will you or they themselves have to bear any financial burden in the form of tax? Here is everything you need to know about the rules governing foreign remittances to your parents in India.

Will the money you send be taxable for your parents?
It is perfectly legal to send money to your parents in India and they will not have to pay any tax on the transferred amount. However, if they invest this money, the income they receive will be taxable in their hands. Money received in an Indian bank account from an overseas relative is known as an inbound remittance and these remittances are governed by the Foreign Exchange Management Act (FEMA). These will only be exempt from tax if the money is transferred for the purpose of covering living expenses or financial support, as a gift, for education, medical care, travel expenses, investments and donations. FEMA also specifies which family members can receive the money tax-free and include the following:

  • One of the direct ascendants or descendants of the sender.
  • One of the direct ascendants or descendants of the spouse.
  • All spouses of the two above.
  • Spouse of the consignor.
  • Brother or sister.
  • Partner’s brother or sister.
  • Brother or sister of the parents of the sender.

If the money is sent from abroad to someone other than the above parents, it will be taxed as income if it exceeds Rs 50,000 per year.

How much money can you send them?
According to the RBI, your parents in India can receive the incoming remittance in two ways: the Rupee Drawing Arrangement (RDA) and the Money Transfer Service Program (MTSS). While the former has no upper limit for personal remittances, that limit is capped under MTSS at $ 2,500 and the family member can receive a maximum of 30 remittances during of a calendar year.

Will it be taxable for you in the foreign country?
While there is no limit to the money you can send to your parents in India, the foreign country you are staying in may have their own rules and limits on the maximum amount you can send without incurring any tax liability. These regulations differ from country to country. For example, in the United States, you can send up to $ 15,000 per year to India without charging any tax.

Transfer fee
The fees for incoming remittances to your parents’ bank account may vary, and you will need to check with the bank for the exact costs. It is likely that the bank will inform you of the transfer fee before the transaction is completed. The cost depends on various factors such as the current exchange rate, bank charges for the same, the country from which the payment is made, the type of transfer, the type of account, among others.

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We’ve all been faced with a financial dilemma when it comes to relationships. How do you say no to a friend who wants you to invest in their new business? Should you take out a loan from your married brother? Are you concerned about your wife’s impulse purchases? If you have difficult issues to solve, write to us at [email protected] with “Wealth Whines” in the subject line.

(Disclaimer: The advice given in this section does not come from a licensed healthcare practitioner and should not be construed as psychological, therapeutic or medical advice. ET Wealth and the Writer will not be responsible for the outcome of any suggestions made in the column.)

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