The Reserve Bank of India (RBI) has recently imposed stricter regulations on offshore gifting, particularly for affluent Indian families sending substantial financial gifts to their children living abroad. These gifts are often used to support various needs, such as education, property purchases, or immigration investments, such as the U.S. EB-5 visa program. While the practice of offshore gifting has grown in popularity, the RBI has increased scrutiny, especially when these transactions involve significant foreign investments and large remittances.

A central concern for the RBI is the circumvention of repatriation rules under the Liberalised Remittance Scheme (LRS). The LRS allows Indian residents to remit up to USD 250,000 per financial year for permissible purposes, including gifts. However, issues arise when the proceeds of foreign investments are gifted directly to NRI children without repatriating the funds back to India, which violates the spirit of the LRS. According to the RBI's guidelines, sale proceeds must be repatriated to India within 180 days, or reinvested abroad, failing which penalties may apply under the Foreign Exchange Management Act (FEMA).

Tax implications further complicate offshore gifting. While gifts from Indian residents to close relatives like children are exempt from tax, gifts exceeding INR 50,000 from non-relatives are taxable. NRIs receiving such gifts must also be aware of tax obligations in their country of residence. For instance, in the U.S., gifts above the annual exclusion limit could require the filing of gift tax forms, adding another layer of complexity to cross-border gifting.

To comply with RBI regulations and ensure tax efficiency, individuals must repatriate funds within the stipulated 180-day period, utilize the LRS to remit up to USD 250,000 per financial year, and maintain proper documentation, including a gift deed where applicable. Consulting with legal and financial experts is recommended to navigate the regulatory landscape and avoid penalties.