Is Gift Received by An NRI From Another NRI Taxable In India?

I am an NRI and staying in Canada. One of my Distant Cousin(not relative) who is also an NRI in Gulf wants to Give an Gift of Rs.300000/- into my Indian Account. What will be the Tax Implications in India. I heard earlier that there is no Gift tax, but one of my friend says that presently if you receive Gift from other than relative it is taxable. My question is that we both are NRI and he is just remitting to my Indian Account that Gift, will it attract any tax. I will be using that amt for investment in housing. Suresh Jain , Chennai

Section 56(2)(vi) of the I T Act provides that any  gift of money  by following persons or in following circumstances   are not taxable

(a) from any relative; or

(b) on the occasion of the marriage of the individual; or

(c) under a will or by way of inheritance; or

(d) in contemplation of death of the payer; or

(e) from any local authority as defined in the Explanation to clause (20) of section 10; or

(f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or

(g) from any trust or institution registered under section 12AA.

Who are relatives ?

As per Explanation given under section 56(2)(vi) of the I T Act , “relative” means—

(i) spouse of the individual;

(ii) brother or sister of the individual;

(iii) brother or sister of the spouse of the individual;

(iv) brother or sister of either of the parents of the individual;

(v) any lineal ascendant or descendant of the individual;

(vi) any lineal ascendant or descendant of the spouse of the individual;

(vii) spouse of the person referred to in clauses (ii) to (vi).

Therefore, if a Non Resident Indian who is not a relative within the meaning of relative given in Explanation , gives gift of money to another Non resident Indian in his Indian bank account , such amount of money will become taxable under I T Act as income from other source.

When will it not be taxable ?

In following circumstances, however, there will not be tax on amount of gift

1. NRI is giving sums of money in any foreign bank account , in that case, since the gift is not received within India , such sum can not be taxable in case of a Non Resident.

2. There is no other income of Non Resident receiving the gift , in India and total income of the non resident is less than maximum exempt under I T Act. That is gift money plus other income of the NRI in India is below Rs 1,50,000 for FY 2008-09.

3. The aggregate gift of money is less than Rs 50,000 in a year.