Facts:

• Mr. A is a resident individual in Mohali.
• He wants to gift INR 500,000 to his son, Mr. X, who is an NRI residing in the USA.

What does the law say?

• Under RBI Master Directions on LRS:
  • A resident individual can gift rupees to an NRI/PIO relative (relative as defined under Section 2(77) of the Companies Act, 2013).
  • The gift must be remitted by crossed cheque or electronic transfer.
  • The gifted amount must be credited to the NRO (Non-Resident Ordinary) account of the NRI/PIO.
  • Such credit is considered an eligible credit to the NRO account.
  • The gift amount counts towards the donor’s overall LRS limit of USD 250,000 per financial year.
  • The donor must ensure the aggregate remittances in the financial year, including the gift, do not exceed the LRS limit.

Conclusion for Mr. A

• Mr. A can gift INR 500,000 to his son under LRS, subject to the USD 250,000 overall limit.
• The transfer must be made by crossed cheque or electronic transfer.
• The amount should be credited to the son’s NRO account.
• Mr. A must ensure he has not exceeded the LRS limit in the current financial year.

If you want, I can also help you with the practical steps or documentation required for such a transfer.