When RBI data reported by Business Standard on 23 October 2026 showed that resident Indians sent USD 215.7 million abroad as gifts in August, up 13.3 per cent from a year earlier, the figure drew little attention. It deserves more, because many of those transfers are parents sending money to adult children working overseas. A gift to NRI children looks simple from the parent's side, and in India most of the tax questions are settled. The harder checks sit in two places families tend to skip, which are the parent's running TCS position for the year and the reporting rules in the country where the child lives.
The rules on collection, credit and refund are covered in Raveum's guide to TCS on foreign remittance, the reference for the rates used here. This piece looks at what the Income-tax Act, 2025 and the RBI say about such gifts, what TCS costs in rupees, and what a child in the US must file. On a family gift, an advisor adds most value by checking both ends of the transfer before the money moves, rather than the Indian end alone.
What the August remittance data shows
According to the RBI data, total remittances under the Liberalised Remittance Scheme were USD 2.74 billion in August 2026, 3.6 per cent higher than in August 2025. Travel remained the largest purpose at USD 1.63 billion. Money sent for the maintenance of close relatives abroad came to USD 275.43 million, according to IANS, so gifts and maintenance together passed USD 490 million in a single month. That was more than the USD 321.5 million that residents put into overseas equity and debt.
The RBI series records purposes, not people, so it cannot say who received the money. Even so, advisors to families with children in the US, the UK or the Gulf will know the pattern. Parents fund a deposit on a home, help with a first job in a costly city, or move savings to a child who has settled abroad. Each of these transfers runs through the same LRS limit of USD 250,000 per person per financial year that the parent also uses for travel, education and investment.
How a gift to NRI children is taxed in India
The RBI's FAQs on the scheme list gift or donation as a permitted purpose within the USD 250,000 limit, and they require a PAN for every LRS transaction. A parent can also make a rupee gift to an NRI child by crossed cheque or electronic transfer into the child's NRO account, which the RBI treats as an eligible credit. That rupee route still counts within the parent's LRS limit, and the RBI places the duty of staying within the limit on the donor.
On the income tax side, Section 92(2)(m) of the Income-tax Act, 2025 taxes a sum of money received without consideration once it exceeds ₹50,000 in a tax year. Section 92(3)(a) exempts money received from a relative, and the definition in Section 92(5)(g) covers lineal descendants, which includes a son or daughter, as well as brothers and sisters. Section 9(8) deems certain sums paid by a resident to a non-resident to arise in India, but it reaches only sums that fall under Section 92(2)(m), so an exempt gift from a parent is not caught.
Clubbing is the other question families raise. Section 99 adds to a parent's income the income from assets transferred without adequate consideration to a spouse, a son's wife or a minor child. An adult child is not on that list, so interest or gains the child earns on the gifted money belong to the child. Money given to a spouse who then remits it, or routed through a minor, is a different case, and the trade-offs are set out in TCS on LRS for families.
What TCS costs on a gift and how it comes back
Under Section 394, the authorised dealer collects TCS on LRS remittances above ₹10 lakh in a tax year. The rate is 2 per cent for education or medical treatment and 20 per cent for other purposes, and a gift falls in the second group. TCS is collected in advance rather than charged as a separate tax. It is reported against the parent's PAN and set off against the parent's tax for the year, with any excess refunded after the return is processed.
For example, a client who remits ₹40 lakh to a daughter in New York in tax year 2026-27, with no other LRS remittance that year, would bear TCS of 20 per cent on the ₹30 lakh above the threshold, which is ₹6 lakh. That amount appears on the client's TCS certificate in Form 133 and in Form 26AS, and the client claims it in the return for the year. If the same client had already sent ₹12 lakh through the same bank for an overseas investment, the threshold would be used up, and TCS on the full ₹40 lakh gift would be ₹8 lakh.
The cash flow is what families notice, because ₹6 lakh can take months to come back as a credit or refund. Splitting the gift between two parents, each with a separate threshold, is a common response. It works only when each parent sends money from their own savings, because funds moved between spouses first bring the clubbing question back.
What the child's country asks for
The Indian rules stop once the money leaves the parent's account, and the receiving country's rules begin. For a child who is a US person, the IRS says foreign gifts are not subject to income tax, but gifts from a nonresident alien that total more than USD 100,000 in a tax year must be reported on Form 3520. The form is generally due on 15 April after the year of the gift, and an extension of the child's return extends it too.
The penalty for missing it is heavy. The IRS sets it at 5 per cent of the value of the gift for each month it goes unreported, up to 25 per cent, unless there is reasonable cause. The US tax year runs from January to December while the Indian one runs from April to March, so two gifts that sit in different Indian years can land in the same US year and cross the line together. The IRS also says nonresident donors face US gift tax on gifts of real and tangible property situated in the United States, which is a separate question if a parent plans to give a US asset rather than cash.
Children in the UK, the UAE or Singapore face their own rules on receiving and reporting gifts, which differ from the US position and from each other. The child's local tax adviser should confirm them before a large transfer is made.
What advisors should check before the money moves
Start with the parent's LRS and TCS position for the tax year, including remittances through other banks, so the client knows the TCS cost in rupees before the transfer. Confirm that the child is a relative under Section 92(5)(g) and that the money comes from the parent's own funds, which keeps the clubbing answer clean. Then ask where the child is tax resident and whether this gift, added to others in that country's tax year, crosses a reporting line such as the Form 3520 threshold.
Some families want the child to invest the gift abroad, for instance in US commercial real estate. The money then carries the risks of the investment as well as the rules of the transfer. Private property investments can lose capital and are hard to sell before the property exits. Distributions may stop if tenants leave or values fall, borrowing at the property level magnifies losses, and currency movements change what the holding is worth in rupees. A gift is also final, so the parent keeps no claim on the money or on anything it buys.
Advisors who introduce eligible clients through Raveum's partner page will recognise how often this comes up, because a family's own investment remittance and its gift to a child share one LRS limit and one TCS threshold. Planning one without the other is where most avoidable TCS arises.
The August figures will be overtaken by the next release, but the pattern will hold. In India, a parent's gift to an adult child is largely settled, exempt in the child's hands and outside clubbing. The cost sits in the timing of TCS, and the risk sits in the child's own filings abroad, which no Indian form will flag. An advisor who checks both ends gives the family the answer it needs, and the rate tables in the guide to TCS on foreign remittance confirm the Indian half.
Frequently asked questions
Is a gift to an NRI son taxable in India?
No, in most cases. Under Section 92(3)(a) of the Income-tax Act, 2025, money received from a relative is exempt, and a son is a lineal descendant within the definition of relative. The parent's bank will still collect TCS on the remittance once the parent's LRS remittances for the tax year pass ₹10 lakh.
How much can a resident Indian gift to an NRI under LRS?
A resident individual can remit up to USD 250,000 per financial year under the Liberalised Remittance Scheme, and gifts count within that limit along with travel, education and investment. The RBI makes the donor responsible for staying within the limit. A rupee gift credited to an NRI relative's NRO account also counts toward the same USD 250,000.
Does TCS apply when parents gift money to a child abroad?
Yes. A gift is an LRS remittance for a purpose other than education or medical treatment, so Section 394 applies TCS of 20 per cent on the amount above ₹10 lakh in the tax year. The TCS is credited against the parent's tax and shows in Form 26AS, so it can be claimed back through the parent's return.
Can a resident gift rupees to an NRI's NRO account?
Yes. The RBI allows a resident individual to make a rupee gift to an NRI or PIO who is a close relative, by crossed cheque or electronic transfer, credited to the relative's NRO account. The RBI treats the amount as an eligible NRO credit, but it still counts within the donor's USD 250,000 LRS limit for the financial year.
Does an NRI child in the US have to report a gift from parents in India?
Yes, if the child is a US person and gifts from a nonresident alien total more than USD 100,000 in the US tax year. The child reports them on Form 3520, generally due on 15 April. The gift is not taxed as income, but the penalty for not reporting can reach 25 per cent of its value.
What are the risks if the child invests the gifted money abroad?
The money then carries the risks of the investment. Private real estate can lose capital, is hard to sell before the property exits, and may stop paying distributions if tenants leave or values fall. Currency movements affect its rupee value. Suitability is a question for the child, because the gift is final and the parent keeps no claim.
This article is for general education and is not tax, legal or investment advice. Rules change and depend on individual circumstances. All investing involves risk, including loss of capital, illiquidity and currency movements. Offerings on Raveum are available to eligible investors only and are not open to the general public.
