Your points are valid.In the first case (point no 1),tax is required to be paid in India for even foreign income.Any gift can be made out of this income after the taxes are paid.The gift will not be taxable in the hands of recepient in case the donor and recepient are relatives as defined in the Income tax Act.In any case,there is no gift income to the donor in your case.It is to the donee (parents of the donor).Parents will not be taxed for the same whether the gift is made out of taxable or non taxable income of the donor.In case,donor's income is taxable,he has to make payment of the taxes or at least make provision for the same before he makes any gift to his parents.
