InvestorQ : What are best options of investment to NRE account holder in India? How much in income tax to parents, if fund transferred from NRE account? (if other income is nil). What is better option 1) investment by NRE account holder?
B G Deshmukh made post

What are best options of investment to NRE account holder in India? How much in income tax to parents, if fund transferred from NRE account? (if other income is nil). What is better option 1) investment by NRE account holder?

Answer
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Ira Shah answered.
3 weeks ago


Non-Residential External (NRE) account is an account opened in India in the name of a Non-residential Indian (NRI) for the purpose of investment or parking NRI’s income in India. NRE account is maintained in Rupees where you put your money (income earned) outside India. There are three different types of accounts under which an NRI can opt for investment, such as:

1.Savings Account: These accounts primarily offer withdrawal of funds domestically by family members or the power of attorney holders.

2.Current Account: This account is beneficial when one has an operational business in India.

3.Fixed Deposit Account: This account offers the highest interest rates. However, withdrawal of the money becomes less beneficial under this account.

Any interest received on these accounts shall be tax-free.

If you transfer any amount to your parents' account for their living expenses or any other purpose, in that case, there is no tax implication neither on you nor on them. This is because the amount you have transferred shall be considered as a gift and under section 56(2) of the Income-Tax Act, gifts received from certain relatives shall not be taxable. Under the definition of relative falls, parents, spouse, your brother/sister and their spouses, spouse’s brother/sister and their spouses, your or your spouse’s lineal ascendant or descendant, etc. So, any gifts whether in cash, bank transfer, or cheque exchanges between you and these relatives are not taxable, irrespective of whether they have any taxable income or not.

However, if you have transferred the money for a specific purpose like the purchase of property, making investments in shares/mutual funds, etc. any income received from such investment shall be taxable in the hands of your parents/relative to which you have transferred the money.