Gift money to parents in India: what is taxed, what is not, and why it must go through a bank

A person working in Australia can gift money to parents in India in any amount, ₹5 lakh (₹500,000) or ₹5 crore (₹50,000,000), and neither India nor Australia taxes the gift itself. India does tax gifts, but it exempts money received from a “relative”, and a son or daughter is on that list. The rules that do apply sit around the transfer: the route the money takes, the cash ceilings, the record of where it came from and the income it earns afterwards.

Gift money to parents in India: the tax rule since 1 April 2026

The Income-tax Act 2025 came into force on 1 April 2026 under its own section 1, and the Central Board of Direct Taxes’ press release of that date describes it as “replacing the six-decade-old Income-tax Act, 1961” and doing so “without altering the underlying tax policy”. The gift rule moved from section 56(2)(x) of the old Act to section 92(2)(m) of the new one, with the same ₹50,000 figure and the same exception for relatives.

Section 92(2)(m) taxes, as income from other sources, “any sum of money without consideration” that a person receives in a tax year where the total exceeds ₹50,000. Once the total crosses that line, “the whole of such sum” is taxed. Section 92(3) then carves out money received “from any relative”, on the occasion of the individual’s marriage, under a will or by way of inheritance, and in contemplation of the giver’s death. Section 92(5)(g) defines a relative of an individual as the spouse; a brother or sister; a brother or sister of the spouse; a brother or sister of either parent; “any lineal ascendant (maternal as well as paternal) or descendant”; the same for the spouse; and the spouse of anyone in the groups after the individual’s own spouse.

A son or daughter is a lineal descendant, and section 92(3) sets no ceiling on money from a relative. A son-in-law or daughter-in-law is the spouse of a lineal descendant, so their gifts to the parents fall within the exception too. The department’s tutorial on the 2025 Act explains that if total gifts in a year exceed ₹50,000, “the total value of all such gifts will be charged to tax (i.e., the total amount of gifts, not the amount in excess of Rs. 50,000)”.

What the gift earns is a separate question

Section 92(3) exempts the sum received. It does not cover what the money later earns, such as interest on a fixed deposit or rent. India’s clubbing rules, which in some cases add income from gifted assets to the giver’s income, sit in section 99 of the 2025 Act (section 64 of the 1961 Act). Both reach a spouse, a son’s wife and a minor child. Neither extends to assets given to a parent.

The Australian Taxation Office takes the same approach for gifts received in Australia: gift money “does not form part of your assessable income and you don’t have to declare it, regardless of the amount”, but “if that money goes on to produce income for you, for example bank interest, then this will become part of your assessable income.”

The gift deed question

Section 123 of the Transfer of Property Act 1882 provides that “a gift of moveable property may be made either by a registered instrument or by delivery of the property”, so a registered deed is one of two routes.

Tax is a separate test. Section 104 of the 2025 Act (section 69A of the 1961 Act) deals with an “unexplained asset”, a term that includes money. Where no explanation of its “nature and source of acquisition” is given, or the explanation “is not satisfactory in the opinion of the Assessing Officer”, its value “shall be deemed to be the income of the assessee”. The section prescribes no form of evidence. A bank record of the remittance showing the child as sender, and a signed note recording the amount, the date and the relationship, document both the source and the gift.

Why the money must go through a bank

Section 3(c) of the Foreign Exchange Management Act 1999 provides that, save as permitted, no person shall “receive otherwise through an authorised person, any payment by order or on behalf of any person resident outside India in any manner”. Its Explanation deems a person in India who receives such a payment “without a corresponding inward remittance from any place outside India” to have received it outside an authorised person, which covers arrangements where cash is handed over in India against a payment in Australia. The Reserve Bank’s Manner of Receipt and Payment Regulations 2023 add that receipts and payments between a resident and a non-resident “shall, unless provided otherwise, be made through an Authorised Bank or Authorised Person”. Section 13 sets the penalty at “up to thrice the sum involved” where the amount is quantifiable.

Indian tax law adds a cash ceiling. Section 186 of the 2025 Act (section 269ST of the 1961 Act) bars any person from receiving ₹2 lakh (₹200,000) or more “in aggregate from a person in a day”, in a single transaction or for transactions relating to “one event or occasion” except by account payee cheque, account payee bank draft, electronic clearing through a bank account or another prescribed electronic mode.

If a parent receives the Australian Age Pension

For parents in Australia on the Age Pension, the Department of Social Services’ Social Security Guide says a one-off gift “IS NOT treated as income”, and since 1 July 2017 neither are gifts “received regularly from an immediate family member”, with mother, father, son and daughter given as examples. Regular gifts from other sources, such as a firm, are income. Once the money sits in a bank account it is a financial investment, and deeming “assumes that financial investments are earning a certain rate of income, regardless of the amount of income they are actually earning”.

The rule cuts the other way for a sender on an assets-tested Australian payment. Services Australia allows gifts of A$10,000 in one financial year and A$30,000 over five financial years; amounts above those limits are counted in the assets test and deemed under the income test for five years from the date of the gift. The Guide confirms the deprivation provisions “apply to all payments subject to assets testing”.

What Australia asks of the sender

The ATO lists “gifts from relatives given out of love” among amounts that are not declared as income, unless they are received as part of a business-like activity or for work as an employee or contractor, and its community guidance adds that “there’s no limit on how much money you can give or receive as a gift”. There is no deduction either. The ATO’s page on gifts and donations rules out “gifts to family and friends, regardless of the reason”, and its worked example is a taxpayer who sends A$100 each payday to elderly family overseas and cannot claim a deduction. The ATO considers giving someone a house “the same as you selling the house”, with capital gains tax applying, and treats a gift of shares or crypto assets the same way as selling them.

The reporting falls on the bank or remitter. Under section 46 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, a reporting entity that provides an “international value transfer service” at or through a permanent establishment in Australia must report it to the AUSTRAC CEO within 10 business days. The Act sets no dollar threshold for that report and leaves conditions and exemptions to the AML/CTF Rules. Physical cash is treated differently: a “threshold transaction” is a transfer of physical currency of A$10,000 or more, and under section 53 moving cash or bearer negotiable instruments totalling A$10,000 or more into or out of Australia without a report is an offence.

The gift rule survived the replacement of India’s tax code: money a parent receives from a child is exempt whatever the amount. Around it, FEMA requires the receipt to come through an authorised person, section 186 limits cash receipts and section 104 allows money of unexplained source to be taxed as income. Australia neither taxes the gift nor allows a deduction for it, and the AML/CTF Act puts the reporting on the business that sends the money. This article is general information, not legal or tax advice.