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

If you find yourself living and working in a foreign country while your retired and aged parents are in India, it can be an emotionally stressful situation for both. While there may be little you can do about the status other than visiting as often as you can, what you can do to assist them in their retirement is provide financial support. But is it legally tenable to send them money from a foreign country? If yes, how much can you send? More importantly, will you or they have to bear any kind of financial burden in the form of tax? Here’s all that you need to know about the rules governing inward 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 incur any tax on the transferred amount. However, if they invest this money, then the income they receive will be taxable in their hands. The money received in an Indian bank account from a relative abroad is known as inward remittance and these remittances are governed by the Foreign Exchange Management Act (FEMA). These will be tax-free only if the money is being transferred for the purpose of providing living expenses or financial support, as a gift, for education, medical treatment, travel expenses, investments and donations. FEMA also specifies the family members who can receive the tax-free money and include the following:

  • Any of the sender’s lineal ascendants or descendants.
  • Any of the lineal ascendants or descendants of the spouse.
  • Any spouses of the above two.
  • Sender’s spouse.
  • Brother or sister.
  • Brother or sister of spouse.
  • Brother or sister of the sender’s parents.

If the money is sent from abroad to anyone other than the above relatives, it will be taxed as income if it is over Rs 50,000 in a year.

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

Will it be taxable for you in the foreign country?
While there is no limit to the money you can send your parents in India, the foreign country you stay in may have its own rules and limits on the maximum amount that you can send without incurring any tax liability. These regulations differ for various countries. For instance, in the US, you can send up to $15,000 a year to India without inviting any tax.

Transfer charges
The charges for inward remittances to your parents’ bank account may vary and you will have to check with the bank for the exact costs. It is likely that the bank will inform you about the transfer charges before the transaction is carried out. The cost depends on various factors like the current currency exchange rate, bank’s charges for the same, the country from which the remittance is being made, type of transfer, type of account, among others.

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All of us have been in a financial dilemma when it comes to relationships. How do you say no to a friend who wants you to invest in his new business venture? Should you take a loan from your married brother? Are you concerned about your wife’s impulse buying? If you have any such concerns that are hard to resolve, write in to us at with ‘Wealth Whines’ as the subject.

(Disclaimer: The advice in this column is not from a licensed healthcare professional and should not be construed as psychological counselling, therapy or medical advice. ET Wealth and the writer will not be responsible for the outcome of the suggestions made in the column.)

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