Shivashankar is a retired banker. His son Kumar is an NRI who has settled in the US. Shivashankar has been investing in foreign assets (stocks & shares in the US stock exchange) for some years now. Kumar intends to buy a home in the US. Shivashankar intends to gift some funds to his son to help him the property in the US. He has decided to liquidate his investments in assets held in the US (stocks & shares) and gifts the proceeds to his son. Is this allowed as per RBI regulations?

Liberalised Remittance Scheme (LRS):


With a lot of Indians settling down overseas, the need for financial support from family was crucial. The RBI introduced the LRS (Liberalised Remittance Scheme) in 2004. LRS allows an Indian resident to transfer upto $250,000 per year towards investments, education, travel, and maintenance of relatives living abroad. LRS rules have become stringent since the 2022 when RBI updated the rules.

Updated in LRS rules:

As per the updated rules, a resident Indian has to repatriate the proceeds from sale of foreign investments or must reinvest it there. This restricts the resident Indian to gift it to his/her relatives (NRI) living overseas.

What’s changed in gifting foreign wealth to NRIs:

Traditionally, HNIs gifted the sale proceeds of overseas investments to their children living abroad. This process allowed them to bypass the annual LRS limit of $250,000 by simply transferring wealth as a gift rather than re-patriating it to India.

Recent updates to the RBI rules has made this practice legally complex.

FEMA: Gifting proceeds from foreign investments directly to an NRI could be viewed as a violation of FEMA regulations.

LRS: Gifting money is allowed under LRS. However, gifting proceeds of foreign investments is strictly not permitted.

PURPOSE: Purpose codes specified during foreign remittance of funds overseas is being closely scrutinized by banks & financial institutions.

How can we help you?

Chockalingam Unnamalai & Associates is a boutique CA firm. Our focus is on quality as against quantity. We have a dedicated team, who focus on personal finance and taxation and can help you to navigate the chaotic tax laws and updates with ease. We can help you understand the pros and cons of various choices you make in the context of personal taxation. You can bank on us for a stress free tax filing and related compliances.

Call us at +91 98840 56628 or drop a mail to unna@cuaonline.in

NRI and related tax issues

In spite of shifting base to different geographies, many Indians keep in touch with their roots, tradition, culture and rituals as that has been the way our DNAs are made!

Income tax as a subject by itself undergoes numerous changes every year and it could be quite cumbersome to keep a tab on the innumerable changes. Recent changes to the Income Tax Act changed the way NRIs are taxed in India. With the introduction of the term “deemed resident”, it becomes all the more important to review the residential status every year. The Income Tax law is more stringent now and has more tools to track and tap information to enable effective taxing of the NRIs.

Being an NRI, you have to deal not with one but with at least two country’s tax laws. We understand your needs and can be of tremendous support in keeping tax compliance in India on track. Our NRI services can help you save time and effort, while also minimizing the risk of penalties and legal issues arising from non-compliance with tax laws.

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