This article discusses the mechanics and tax exemption rules applicable to US-based NRIs who wish to gift money to their parents in India.
Disclaimer: Taxation is a dynamic concept and the content of this article is valid on the date of publication and any subsequent updates. Always consult a professional tax advisor before doing anything that leads to taxes being due.
📚 Topics covered:
- How much exemption can NRIs in the US get when they gift money to their parents in India in 2023?
- What has been the historical exemption limit for gifts?
- FAQs on the mechanics of gifting to parents
- Is a gift deed necessary when NRIs gift assets to parents?
- Which account should be chosen to transfer money to India?
- Is the gift limit applicable to the person giving the gift?
- Can other legal heirs later lay a claim on the amount to the parents?
- Is there further tax on the gifted amount from NRI to parents?
This article is for 2023. The latest one is here: How much money can NRIs in the US gift to their parents in India without paying tax?
How much exemption can NRIs in the US get when they gift money to their parents in India in 2023?
USD 17,000 per person is the annual Gift Tax Exemption amount for 2023 as notified by the IRS.
This amount is offset against the lifetime Gift and Estate Tax Exemption limit. This limit is currently at $12.92 million. If you exceed the annual exemption amount, then you need to fill Form 709 while filing your returns. To understand how this article can help you:
Uses of this gifting process could be:
- How can NRIs easily manage their parents’ finances in India where NRIs gift money to their parents in India to manage their day-to-day expenses
- Investing in India in the name of their parents to reduce their globally taxable income
- Purchase property in India in the name of parents to create rental income for them
Warning: Money sent to parents becomes part of the parent’s assets. At the time of death, others like the siblings of the NRI child might make a claim against these assets. We have discussed this point in detail here: Who should invest in the name of parents to save tax? Who should not?
What has been the historical exemption limit for gifts?
| Serial # | Calendar Year | Exempted Amount ($) |
|---|---|---|
| 1 | 2002 | 11,000 |
| 2 | 2003 | 11,000 |
| 3 | 2004 | 11,000 |
| 4 | 2005 | 11,000 |
| 5 | 2006 | 12,000 |
| 6 | 2007 | 12,000 |
| 7 | 2008 | 12,000 |
| 8 | 2009 | 13,000 |
| 9 | 2010 | 13,000 |
| 10 | 2011 | 13,000 |
| 11 | 2012 | 13,000 |
| 12 | 2013 | 14,000 |
| 13 | 2014 | 14,000 |
| 14 | 2015 | 14,000 |
| 15 | 2016 | 14,000 |
| 16 | 2017 | 14,000 |
| 17 | 2018 | 15,000 |
| 18 | 2019 | 15,000 |
| 19 | 2020 | 15,000 |
| 20 | 2021 | 15,000 |
| 21 | 2022 | 16,000 |
| 22 | 2023 | 17,000 |
| 23 | 2024 | 18,000 |
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You can use this table to plan the total offset against the lifetime Gift and Estate Tax Exemption limit.
Related:
How much money can NRIs gift to parents in India?
Also read
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FAQs on the mechanics of gifting to parents
Is a gift deed necessary when NRIs gift assets to parents?
There is no tax payable by the gift receiver. However, to be on the safe side from the Indian tax perspective, it is better to create a gift deed.
Which account should be chosen to transfer money to India?
The US-based NRI can transfer money directly to the bank account of their parents. The NRI should not be a joint holder in that account since then it will not be a gift.
Is the gift limit applicable to the person giving the gift?
No. The limit applies to the person receiving the gift. So, if you have two family members in India, you gift $18,000/year to each.
Can other legal heirs later lay a claim on the amount to the parents?
If the parents die intestate, i.e. without a will, other legal heirs like siblings of the NRI can lay a claim on the gifted assets. If multiple heirs exist, it is prudent to make a will.
Is there further tax on the gifted amount from NRI to parents?
There is no tax at the point of gifting on the parents. But there will be tax out of any income from the amount that will be paid by the parents since that will be in their name.
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This post titled How can NRIs in the US gift money to their parents in India in 2023? first appeared on 04 Jan 2023 at https://arthgyaan.com
