These are a set of queries raised by ET Wealth readers, which have been answered by our panel of experts.
My two NRI children are unable to find a field in ITR-2 to disclose gifts received from relatives. The Income Tax department has also not responded to the grievance lodged on its portal regarding this issue. Kindly guide us on how such gifts should be reported in the ITR so that they can file their returns.
Amit Maheshwari Managing Partner, AKM Global: Any money received as gift from specified relatives such as parents, siblings, or grandparents, is fully exempt from income tax in India. This exemption applies equally to Non-Resident Indians (NRIs). Therefore, the financial gifts received by your children do not constitute taxable income and will not attract any tax liability in India.
All tax-free receipts must be disclosed under Schedule EI (exempt income) when filing ITR-2. While it is true that the current utility lacks a dedicated drop-down specifically named “gifts from relatives,” omitting this information can be risky. High-value bank transfers will almost certainly be reflected in your children’s Annual Information Statement (AIS). If the tax return shows zero exempt income but the AIS shows a large remittance, the system’s algorithms may trigger an automated compliance notice for the mismatch.
To avoid this, your children should select the “any other” option under Schedule EI and manually type a brief description, such as “gift received from father/mother,” to declare the amount. To easily establish the genuineness of the transaction, your children must maintain comprehensive documentation.
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Both my son and daughter are US passport holders with OCI cards. They are currently employed in India. Do they need to file tax returns in both India and the US? Could you explain the tax filing requirements in such cases? I have also heard about FBAR reporting—does it apply to them?
Amit Maheshwari Managing Partner, AKM Global: US citizens residing in India are generally required to file income tax returns in India as tax residents, reporting their global income. They must also obtain a US Social Security Number (SSN) and file mandatory US federal tax returns (Form 1040) in compliance with the US tax laws.
Double taxation is prevented through mechanisms like the Foreign Tax Credit (FTC) and the Foreign Earned Income Exclusion (FEIE), which allows an individual to legally exclude foreign earned income up to a certain threshold. However, these legal reliefs are not automatic; a US tax return must be filed to claim them. Additionally, the individuals must file an annual FBAR report if their combined Indian financial account balances exceed USD 10,000, as non-compliance carries severe penalties.
To resolve any previously missed FBAR filings since employment began, utilising the IRS Streamlined Amnesty program is highly recommended. Further, it is advisable to consult a US tax adviser to ensure complete and accurate compliance with applicable US tax reporting norms.
Our panel of experts will answer questions related to any aspect of personal finance. If you have a query, mail it to us right away. Email ID: etwealth@timesgroup.com
