I want to gift some money to my NRI son in Canada. What documents and declarations are required?

Under the RBI's Liberalised Remittance Scheme, the permitted purposes for remitting money abroad include education, foreign travel, medical expenses, investments in shares, property etc. This facility is also applicable for opening foreign bank accounts, making gifts and donations. However, not many individuals are aware of the rules related to sending money as a gift. Today's Q&A explains this in detail in response to a query by a reader who wants to gift money to his NRI son living in Canada.

A resident individual is allowed to remit up to 2.50 lakh USD during one financial year every year outside India under the Liberalised Remittance Scheme (LRS) for specified purposes. This scheme is governed under FEMA 1999 regulations by the Reserve Bank of India (RBI).

No prior permission of the RBI is required to move funds for such authorized purposes, but you have to furnish your PAN details.

The permitted purposes for which LRS can be used include education, foreign travel, medical expenses, investments in shares, property etc. This facility can also be used for opening foreign bank accounts and for making gifts and making donations. This facility cannot be used for speculative purposes, buying lottery, sweepstakes, or margin trading/forex trading etc.

As the making of a gift is covered under the permitted purposes, you need not obtain any permission from the RBI.

The income tax law requires the remitting bank to collect tax at source (TCS) in addition to the amount to be remitted at the time of remittance. The remitting bank is required to collect TCS at 20% on a remittance over ₹10 lakh in a year. The limit of ₹10 lakh is calculated with reference to all the remittances made during the year.

The remittances made under LRS are tracked on PAN basis.

For remitting purposes, you are required to complete the documentation as required by the remitting bank.

For a gift to be complete, the same needs to be accepted by the donee. So one email expressing your intention to make the gift and its acceptance on the email by your son will be sufficient enough for this purpose. There are no tax implications for either of you under the Indian tax laws. The tax implications for your son in Canada may be evaluated.