Residential standing definition varies in legal guidelines

My daughter has been staying and working in the US on an H-1B visa for the past two years. Does she qualify as a non-resident Indian (NRI)? Can she transfer funds to me in India for meeting my expenses? Are such funds taxable?

—Name withheld on request

The rules that determine the residential status of a person under the exchange control law are different from those under the income tax law. Under the income tax law, any “citizen of India” or “person of Indian origin” who lives outside the country and only makes visits here, will qualify as a non-resident in India under the following scenarios: Physical presence in India during the relevant financial year is less than 182 days, and India-sourced income is less than 15 lakh; physical presence in India during the relevant financial year is less than 120 days even if India-sourced income exceeds 15 lakh; and physical presence in India during the relevant financial year is 120 days or more but less than 182 days and less than 365 days in the preceding four financial years, even if the India-sourced income exceeds 15 lakh.

However, under the exchange control law, when a person leaves India for employment, for carrying on business, or for any other purpose indicating his/her intention to stay outside India for an uncertain period, he/she may be considered as a “person resident outside India”. Assuming your daughter is covered under the above scenarios, she may qualify as an NRI under the exchange control law.

Further, your daughter may remit her earnings to you for meeting your expenses in India. Under the income tax law, where any sum of money exceeding 50,000 is received by an individual without consideration from any person, the same is taxable in the hands of the recipient individual. However, gifts from a relative are not liable to tax in the hands of the recipient or in the hands of the person giving the gift. The term ‘relative’ is defined to include spouse, brother or sister, brother or sister of the spouse, brother or sister of either of the parents, any lineal ascendant or descendant, any lineal ascendant or descendant of the spouse, and others.

Accordingly, there will no income tax implications in India on transfer of funds by your daughter to you for meeting your expenses in India either for you or your daughter.

Sonu Iyer is tax partner and people advisory services leader, EY India.

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