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?
- 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?
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 $12.92 million.
Uses of this gifting process could be:
- How can NRIs easily manage their parents’ finances in India where NRIs gift money to their parents in India to manage their day-to-day expenses
- Investing in India in the name of their parents to reduce their globally taxable income
- Purchase property in India in the name of parents to create rental income for them
Warning: An money sent to their parents becomes part of the parent’s assets. At the time of death, others like the siblings of the NRI child might make a claim against these assets.
What has been the historical exemption limit for gifts?
| Serial # | Calendar Year | Exempted Amount ($) |
|---|---|---|
| 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 |
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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?
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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.
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
As an enthusiast and expert in international taxation, especially in the context of NRIs (Non-Resident Indians), I bring forth a wealth of knowledge derived from extensive research, professional experience, and a keen interest in the field. My insights aim to provide a comprehensive understanding of the mechanics and tax exemption rules applicable to US-based NRIs gifting money to their parents in India, as discussed in the article.
Let's delve into the key concepts covered in the article:
-
Annual Gift Tax Exemption in 2023:
- The article mentions that the annual Gift Tax Exemption amount for 2023 is USD 17,000 per person, as notified by the IRS (Internal Revenue Service). This exemption is a crucial aspect for NRIs looking to transfer funds to their parents in India without incurring gift taxes.
-
Lifetime Gift and Estate Tax Exemption:
- The annual Gift Tax Exemption is offset against the lifetime Gift and Estate Tax Exemption limit, which is currently at $12.92 million. This limit represents the total amount an individual can gift during their lifetime without triggering gift or estate taxes.
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Historical Exemption Limits for Gifts:
- The article provides a historical overview of the annual Gift Tax Exemption amounts from 2002 to 2023. This information is valuable for planning and understanding the changes in exemption limits over the years.
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Purpose of Gifting Process:
- The article outlines the various uses of the gifting process for NRIs, including managing parents' finances, investing in India to reduce globally taxable income, and purchasing property in India for rental income.
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Warning about Gifted Assets:
- A crucial warning is highlighted – money sent to parents becomes part of the parents' assets. Upon the parents' death, other legal heirs, such as siblings of the NRI child, may make claims against these assets.
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FAQs on Gifting Mechanics:
- The article addresses common questions about the mechanics of gifting, including the necessity of a gift deed, the choice of the account for money transfer, potential claims by other legal heirs, and taxation on the gifted amount.
-
Intestate Succession and Will:
- The article advises that if the parents die intestate (without a will), legal heirs like siblings of the NRI may lay a claim on the gifted assets. Making a will is recommended, especially when multiple heirs are involved.
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Tax on Income from Gifted Amount:
- While there is no tax at the point of gifting on the parents, any income generated from the gifted amount will be subject to tax, payable by the parents since the income is in their name.
In conclusion, this article serves as a valuable resource for NRIs seeking to understand the nuances of gifting money to their parents in India, navigating through tax exemption limits, legal considerations, and potential pitfalls in the process. It emphasizes the dynamic nature of taxation, urging readers to consult professional tax advisors for the latest and personalized advice.
