On ₹30 lakh (about £28,000), that is the difference between zero tax and roughly a third of the gift gone.
Boki writes this because the reflex, on both sides, is to call generous family-friend money a "gift" and move on. In Indian tax law a gift from anyone outside a tight list of blood and marriage is not a tax-free gift. It is taxable income. A cheap transfer route does not fix that. Only the structure of the transfer does.
Who counts as a "relative" under Indian tax law
The exemption for gifts between relatives sits in the Explanation to Section 56(2)(x) of the Income Tax Act, 1961, now carried into the Income-tax Act, 2025, which took effect on 1 April 2026. The clause number may be different in the new Act; the list below is the one in force. If the sender is not on it, the exemption does not apply.
- The receiver's husband or wife.
- The receiver's brother or sister, or the brother or sister of the receiver's spouse.
- The brother or sister of either of the receiver's parents, so an aunt or uncle on either side.
- Any direct ancestor or descendant of the receiver: parents, grandparents, children, grandchildren.
- The same line of ancestors and descendants on the spouse's side: parents-in-law, grandparents-in-law.
- The spouse of any of the above, so the wife of an uncle or the husband of a sister.
A cousin is not on the list. A nephew or niece is not on the list. A close family friend, however long-standing, is not on the list. The person Indian families most often mean when they say "like family" is the person Indian tax law most often means when it says "not a relative".
What happens if the sender is not on the list
Any sum of money the receiver gets without consideration from a non-relative in a financial year, if the total crosses ₹50,000, is taxable in full as Income from Other Sources at the receiver's slab rate.
Catch
₹50,000 is the aggregate across every non-relative gift in the year, not a limit per transfer. Once the total crosses it, the entire amount is taxable, not only the part above ₹50,000. Splitting ₹30 lakh across three transfers of ₹10 lakh changes nothing.
On ₹30 lakh of other income, under the new regime that is now the default, the top of the stack is taxed at 30% plus 4% cess. For a receiver who already has a salary in the top band, that is roughly ₹9 lakh gone to tax. For a receiver with little other income, less of it reaches the top slab, so the tax works out between ₹5 lakh and ₹9 lakh. The precise figure is a twenty-minute calculation for a Chartered Accountant with sight of the receiver's full income for the year.
The three paths that are actually open
The receiver's choice is structural, and it is made before the money moves. There are three.
- Send it as a loan. The sender writes a signed loan agreement with a repayment schedule and sends the money through the banks. The inflow is a capital receipt, not income. The receiver's bank does not need to see the paper; the tax officer, if asked later, does. This is the usual answer when the receiver intends to repay and the sender is comfortable to wait.
- Route the money through a real relative, but only if one is already in the chain. If the sender's spouse is the receiver's actual aunt by marriage, the money can pass sender to spouse (same household, no issue) and spouse to receiver (relative to relative, exempt). It works only when the relationship is real. The dressing-up version, where the "relative" is a conduit the family invented for this transfer, is what a tax officer looks for.
- Budget for the tax. If the money is truly a one-off gift and the receiver intends to keep it, the receiver pays the tax on it. On ₹30 lakh that is between ₹5 lakh and ₹9 lakh, depending on their other income. It is a lot. For a one-off, where the sender and receiver do not want to deal with loan paper and repayments, it is sometimes still the cheapest option in time and friction.
What the loan agreement needs on it
A loan agreement that holds up to a notice does not need a lawyer and does not need to be clever. It needs to look like a loan.
- Write the agreement on one or two pages, signed and dated by both the sender and the receiver.
- Name the amount, the currency, the date the money will be paid, the receiver's bank account and the sender's bank account.
- State the repayment schedule in plain terms: a monthly or quarterly amount, over a stated number of years. Interest-free is allowed, and several Indian tribunals have held that an interest-free loan from a non-relative is not a gift. A nominal rate is cleaner still.
- State that the loan is being advanced through banking channels. Loans above ₹20,000 must go through a bank anyway, under Section 269SS of the Income Tax Act.
- Send the money through the bank, keep the inward payment advice the receiver's bank issues when a foreign payment comes in, and start the first repayment on the stated date. Visible repayments going back are what tells a later notice this was always a loan.
The loan path works only if the loan is real. If both sides intend the money as a gift and plan to let the "repayments" quietly lapse, the paper will not save them when a notice arrives.
Sending the money
The decision between loan and gift matters more than the choice of app, and the app is a short answer.
On the numbers pulled for this piece, for a single transfer of ₹30 lakh from a UK sender's bank account to an Indian bank account, Wise is the usual answer for sending from the UK to India: around 0.5% to 0.7% above the real exchange rate, the fee on screen, delivered the same working day. An FCA-authorised currency broker such as Currencies Direct is competitive on sums this large and will quote by phone. An ordinary UK bank running the transfer through SWIFT typically keeps 2% to 3% of the amount in the exchange-rate margin alone, and does not put that line on the receipt.
The receiver's bank in India may ask for its inward payment advice, the paper the bank writes when a foreign payment comes in. Ask for it when the money arrives; keep it with the loan paper if the money is a loan. If the receiver holds an NRE or NRO account rather than a resident savings account, the account form differs but the gift-tax position does not.
Where to go from here
The call, before the money moves, is between loan and gift. If it is a loan, write the agreement, send through a bank, and start the first repayment on the stated date. If it is a gift and the sender is not on the Section 56(2)(x) list, the receiver pays slab-rate tax on the whole amount in the year of receipt and files it under Income from Other Sources. Pay for a Chartered Accountant's hour if the case gets complicated. The signs: a loan structure, FEMA on the repayments, or a receiver whose other income makes the slab calculation hard to work out. The hour is the right fee, not the tax.
India tax rules move at every budget. The clause numbers shifted when the Income-tax Act, 2025 came into force, and may shift again. The piece carries today's date on purpose.
Corrections
None so far. If we get something wrong, the fix is dated here.