NRIs in US: Know About Tax Implications while Making Gifts

By SiliconIndia   |   Monday, December 17, 2012
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Bangalore: In this Christmas, will you be the Santa Clause and give gifts to your loved ones and friends. If you are an Indian American then Christmas is the best time to send goodies and other aspired gifts to your relatives living in India. You may be excited about it, but before sending any gifts, you must learn about tax implications for offering gifts.

Being an NRI when you offer a gift to an Indian resident, you both shall become liable to pay gift tax. But this tax liability must not stop you from sending gifts to India. However, there are some exemptions to the tax on gifts which you must know about, as reported by Deepa Venkatraghvan from TOI.

Tax on gifts in the US

In the United States, tax on gifts is levied in the hands of the giver, so being an Indian American if you make a gift to someone in India, it may attract tax in the US depending on the amount gifted. This includes cash gifts as well as property, irrespective of where the property is located. It also includes cash transfers made from the NRE or NRO account. Moreover, this only applies if you are a U.S. taxpayer, that is, a U.S. resident, green card holder or citizen. At present, gift tax exemption limits are reasonably liberal and are as follows: You can make gifts of up to $13,000 per gift to as many people as you like in a year without paying any gift tax.

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In case of gifts in excess of the $13,000 limit, you can still pay zero tax as long as you do not exceed the lifetime exemption limit. Currently, that is for 2012, up to $5,120,000 is allowed to be gifted/ bequeathed by a person during his lifetime without any tax implication. Any gifts made in excess of the $13,000 limit will be reduced from the $5,120,000 exemption limit. Anything in excess of this limit will be taxed at 35 percent.

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