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We are using a VPS and do not have mail server on that. Now if I want to send mail notifications to users (e.g. to reset password in case somebody forgets password) using gmail, how can I do that?

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If you are using VPS, you should be able to install 'whatever' you want :) Try to configure mail server.

About using gmail, Admin -> Email -> Send email via SMTP instead of local mail
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You can use SMTP with Gmail. In Admin > Email enter these settings:

Tick "send email via SMTP"

Server: smtp.gmail.com

Port: 465

Secure: TLS (SSL should also work)

Tick "use username and password" then fill in your Gmail username and password.

However, do note that there is a limit of how many emails can be sent this way. I've seen varying numbers but according to this it is 500: http://stackoverflow.com/questions/18361233/gmail-sending-limits It should be enough for most use cases.

If you have problems try switching to a service like Mailgun or Sparkpost.
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