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UAE NRIs: Right way to send money to your adult children living abroad

Missteps can cost you—avoid these tax violations when gifting money to kids overseas

Last updated:
Justin Varghese, Your Money Editor
2 MIN READ
Under the LRS, every Indian resident can send up to $250,000 per financial year abroad. There’s no restriction on how often you send money—as long as the yearly cap isn’t crossed.
Under the LRS, every Indian resident can send up to $250,000 per financial year abroad. There’s no restriction on how often you send money—as long as the yearly cap isn’t crossed.
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Dubai: If you’re an Indian expat living in the UAE with children studying or settled abroad, chances are you’ve needed to send them money from India at some point. But with evolving rules under India’s Liberalised Remittance Scheme (LRS), what’s allowed—and what could get you into trouble—is worth knowing.

Also Read: Smart health insurance buys in India can unlock tax perks for UAE-based NRIs

Here’s a simple breakdown for NRIs who want to support their kids overseas without falling foul of the law.

What LRS allows

Under the LRS, every Indian can send up to $250,000 per financial year abroad. There’s no restriction on how often you send money—as long as the yearly cap isn’t crossed.

You can use this for:

· Supporting children’s education or living expenses

· Making gifts or donations

· Investing in property or stocks abroad

However, from July 1, India has hiked the Tax Collected at Source (TCS) on foreign remittances from 5% to 20%, which needs to be paid upfront.

So if you're sending money to your daughter in Canada, for example, you'll need to declare the reason and pay 20% TCS at the time of remittance.

Ease of transfer comes with compliance

Sending money from India to your child abroad seems simple, but NRIs should keep a few things in mind:

· Compare exchange rates and fees from different banks and money transfer services

· Make sure your total annual transfers stay within the $250,000 limit

· Keep documentation handy for tax and audit purposes

Some Indian parents use their savings accounts to send lump-sum gifts to NRI children. That’s fine, as long as it falls under LRS and proper reporting is done.

Where it gets complicated

Things get tricky when Indian residents try to gift proceeds from earlier offshore investments directly to their kids abroad—without repatriating the funds to India first.

For example, suppose you invested $200,000 abroad in 2020. You sell it in 2025 for a profit. If you then transfer part of that gain directly to your child’s foreign bank account as a “gift,” you’re bypassing RBI rules. Why? Because RBI rules say the proceeds must return to India within 180 days, unless reinvested.

Gifting isn’t considered reinvestment.

Business Standard recently reported that some families try to avoid this rule by “gifting” funds offshore without repatriation. They keep using each family member’s LRS limit every year to multiply how much wealth they shift abroad. This concerns the RBI, as it may be viewed as dodging repatriation laws and facilitating offshore wealth migration.

Right way to gift money

If your intention is to support your child overseas or transfer wealth:

· Repatriate the sale proceeds of any previous offshore investment back to India

· Then, use the LRS to send up to $250,000 per year as a gift

· Ensure you file the proper forms and pay applicable TCS

This route is clean, legal, and ensures you stay on the right side of the law.

Final thought..

For UAE-based NRIs, knowing the difference between what’s allowed and what’s risky under India’s LRS can save you a lot of legal and tax headaches. If in doubt, always consult a financial or tax advisor before hitting "send" on a large transfer.

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