# Gift of Money to NR / Foreign Company / RNOR — Deemed to Accrue in India

## Trigger Conditions (All Must Be Met)

1. Payer: Any Indian Resident

2. Recipient: Non-Resident, Foreign Company, or Resident but Not Ordinarily Resident (RNOR)

3. Amount: Sum of money exceeding ₹50,000

4. Place of payment: Outside India

5. Chargeability: Sum is chargeable to tax under Section 56(2)(x) in recipient's hands

## Consequence

The sum is deemed to accrue or arise in India in the hands of the NR / FC / RNOR recipient — and hence becomes taxable in India.

## Why this rule exists

It closes a loophole where residents could escape Indian gift-tax provisions by transferring money outside India to non-residents (e.g., relatives, shell companies).

## Quick Decision Flow

Indian Resident pays > ₹50,000 outside India to NR/FC/RNOR
Without consideration?
Chargeable u/s 56(2)(x)?
→ If both yes: Deemed to accrue in India → Taxable
If covered by exception (relative, marriage, etc.) under 56(2)(x) → Not taxable

Worked example

### Example 1

Example: Mr. Raj (ROR in India) gifts ₹5,00,000 to his cousin Mr. Sam (NR, US citizen), credited directly to Sam's US bank account.

Answer: Since Raj is a Resident, Sam is NR, the amount exceeds ₹50,000, the payment is outside India, and it is chargeable u/s 56(2)(x) (cousin is not 'relative' as defined), the gift is deemed to accrue or arise in India in Sam's hands and taxable in India.

⚠️ Common exam mistakes

Forgetting to check whether the gift would have been chargeable u/s 56(2)(x) at all — if recipient is a covered 'relative' or it is on the occasion of marriage, the deeming does not apply.
Treating gifts to ROR/RNOR the same — the deeming rule only catches NR, FC, and RNOR recipients.
Ignoring the ₹50,000 monetary threshold.

Bare-Act text Section 9(1)(viii) read with Section 56(2)(x) · Income-tax Act, 1961 · click to expand

Section 9(1)(viii): Income arising outside India, being any sum of money referred to in sub-clause (xviia) of clause (24) of section 2, paid on or after the 5th day of July, 2019 by a person resident in India to a non-resident, not being a company, or to a foreign company, shall be deemed to accrue or arise in India.

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Gifts to Non-Residents — Deemed to Accrue in India [Sec 9(1)(viii)]

Worked example

⚠️ Common exam mistakes