NRI taxation: How will a gift from cousin be taxed?

My wife and I live and work in France. My wife’s cousin wanted to gift her money by wire transfer after we hosted her cousin’s family recently while on their trip to France. Would this have any tax implications for my wife in India?
-Name withheld on request

Under foreign exchange regulations, your wife’s cousin is permitted to gift money by making a remittance to your wife’s bank account in France.

The Indian tax law specifies the relatives who can give or receive gifts without any tax implications.  Under the rules, relative in relation to an individual means husband, wife, brother or sister or any lineal ascendant or descendant of that individual.

Also Read: How to move your mutual fund units from one demat to another or gift them

However, it should be noted that ‘cousin’ is not considered a relative under the Indian tax law.

Therefore, any gift exceeding ₹50,000 in a financial year would be subject to tax in your wife’s name on the full amount of the gift. It will be taxed under the Income from Other Sources. Additionally, the India-France Double Taxation Avoidance Agreement (DTAA) does not provide any relief from this tax.

Also Read: What are the tax implications of receiving a gift?

My tax consultant wrongly mentioned my status as a resident while filing my tax return for  2023-24. What is the remedy now?
-Name withheld on request

Correct your residential status in your income tax return to ensure accurate tax computation and to avoid losing tax benefits that are available to non-residents.

The easiest way to update your residential status is by filing a revised return before 31 December 2024.

If you're unable to file the revised return within this deadline, there are still some options available to remedy the situation. For instance, if you receive an intimation under Section 143(1), you can explore alternatives such as submitting a rectification application, filing an appeal against the intimation, or making an application to the Central Board of Direct Taxes for submitting the revised return with a delay, depending on the situation.

Also Read: Redo the Income Tax Act not just to simplify but rationalize taxation

If correcting your residential status results in additional tax liability, you can file an updated return after paying the extra tax due.

Harshal Bhuta, partner, P. R. Bhuta & Co. Chartered Accountants