NRI Doctor Gets Relief In Rs 80 Lakh Gift Tax Dispute

A doctor living in the United Arab Emirates (UAE) has finally won a tax battle over a Rs 80 lakh gift from his brother-in-law, according to a recent report by The Economic Times. The Income Tax Appellate Tribunal (ITAT) in Kolkata ruled in his favour, saying the money was a genuine gift and not taxable.

How The Trouble Began

The doctor ran into trouble after filing his Indian income tax return.

The tax officials saw a huge amount appear in his account and wanted to know where it came from. He explained that his sister’s husband had sent it through the bank.

But the tax department didn’t accept this explanation. They added the Rs 80 lakh to his income, recalculated his earnings at around Rs 1.5 crore, and issued a tax demand of nearly Rs 69 lakh.

The doctor challenged the notice, saying the transfer was from a close relative. Section 56(2)(vii) of the Income Tax Act makes clear that gifts from specified relatives, including brothers-in-law, are exempt from tax, no matter the amount. He also pointed out that no gift deed is required when the relationship and the transaction are clear.

Tribunal’s Take

The tribunal looked at the documents and evidence. They found the gift genuine. The relationship between the donor and the recipient was clear, and the money had moved through legitimate banking channels. The ITAT also said it didn’t matter that there was no formal gift deed or that the funds came from abroad.

Importantly, the bench said the tax officer was wrong to ask the recipient to prove the donor’s source of funds. Once the donor’s identity and capacity were established, the recipient doesn’t have to explain the donor’s finances.

The tax demand was cancelled, and the Rs 80 lakh was confirmed as a legitimate, tax-free gift.

Why It Matters

The ruling gives clarity to both non-resident Indians (NRIs) and resident taxpayers. Gifts from family members, like siblings, in-laws, or parents, are not taxed as long as they are real and can be verified. It’s always a good idea to keep bank statements and documents that show the family connection. This case shows that when money is sent properly and openly, gifts between relatives won’t be taxed.