how can I get inherited money from India to USA? What tax liability?

Hi, I want to know how can I get inheritance money from India to USA? We are two sisters and my Dad nominated only my sisters name in property and a letter saying that we both share 50% of the property but unfortunatally didnt register it and didnt make a will. Now we are selling the property. I want to know if she makes a gift deed and gives me 50% of the money then will tax be applicable to both of us and how much will be the tax rate? She is planning to buy property with her share and I want my share in USA, so what is the best way to get the inheritance money without paying tax?

Answers (1)

419 votes

India does not tax inheritances at the time when such inheritance is received. Tax is levied only on the income generated by the receiver from the inheritance. So in case of financial assets, any interest, dividend or capital gains arising on sale of the assets are taxed in the hands of the receiver. In case of property too, only rental income or capital gains from sale are taxed in the hands of the receiver. It is important to remember that in India, capital gains from inherited property is calculated as the difference between the sale proceeds and the original cost of purchase by the bequeathor (after indexation.

Similarly the US levies an inheritance tax or estate tax at the time of inheritance. However, this tax is levied only if the deceased individual was a US resident, citizen or Green Card holder. If, as a US resident, Green Card holder or citizen you inherited assets in India from an Indian citizen or resident, you will not be subject to inheritance tax. However, you will have to comply with certain reporting requirements.

But we suggest that you can take   the money as a gift .as in US, gift tax is paid by the gifter so it is your sister s responsibility to pay the tax. Now, since your Sister is not a US citizen, she does not owe any tax to US. There are some other subtleties around this but I think in your case, since the transaction i.e. the gifting of the money is not happening within US boundaries, neither she nor you owe any tax. Further, since you are require receiving a transfer from a foreign person, you are required on receipt of such funds to file Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts,if the gift you receive during the year is in excess of $100,000. This is just an information return and no payment is due. This is answer is as per our  legal knowledge so please confirm with a qualified CPA professional in USA and CA of india as they will help you with the  transfer of transaction from India to US

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