NRIs should make their trips to the homeland shorter if they want to avail themselves of the gift tax exemptions, says a recent ruling by a tax tribunal.

The gift tax exemptions will not be available to an NRI if he loses his special status on account of overstaying in India, the Income Tax Appellate Tribunal (ITAT) said.

Giving a ruling in a case involving levy of tax on a gift made by an NRI from his non-resident (external) (NRE) account, the tribunal said, "He was in India for 182 days or more during the relevant previous year.... Thus, the assessee is clearly not entitled to exemption (on gift tax)."

The tribunal agreed with the assessing officer and commissioner of gift tax in Kanpur, who held that the person who had stayed in India for more than 182 days in a year ceases to be an NRI and cannot claim exemption under the section 5 (1) of the Gift Tax Act.

Levy of tax is governed by the Gift Tax Act under which a resident outside India is exempted from the tax if he gives a gift from his NRE account.

However, in the current case, the assessee, according to the tribunal, could not be considered as a person resident outside India because he had stayed in the country for longer than 182 days during the financial year when the gift was made.

The tribunal dismissed the submissions of the assessee that his resident or non-resident status at the time of giving the gift of Rs 10 lakh through cheques was that of an NRI.

The residential status of an individual is determined by the section 6 of the Income Tax Act which among other things says that an individual will be treated as a resident in India he has stayed for more than 182 days in a financial year.

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