NRI Gifting to Indian Children — Tax Rules Both Sides

US side — what gift tax?

US persons (citizens, GC, US residents) are subject to the U.S. gift tax on gifts above:

• Annual exclusion: $18,000 per recipient (2024), $19,000 (2025)
• Above annual exclusion: counts against lifetime gift/estate exemption ($13.61M for 2024)

Form 709 (US Gift Tax Return) is required if gifts to any single recipient exceed the annual exclusion.

What if I gift multiple children?

Each child has a separate annual exclusion. $18K per child per year (2024). For 3 children, you can gift $54K total per year without filing Form 709.

Spouse can also gift $18K per recipient. With "gift splitting," a married couple can gift $36K per child per year.

Indian side — recipient tax

Indian Income Tax Act Section 56(2) exempts gifts from "relatives":

• Spouse
• Parents, grandparents
• Children, grandchildren
• Siblings
• Spouse's siblings, parents

Gift to "relative" → no Indian tax for recipient regardless of amount.

Gifts from non-relatives > ₹50,000 per year → taxable as income in recipient's hands.

For NRI gifting to Indian children: both parties typically meet "relative" definition → no Indian tax for child.

How is the gift remitted?

US person to Indian recipient:

• Wire from a US bank to the Indian recipient's NRO/resident account
• No specific RBI/FEMA cap (LRS doesn't apply to outbound from US)
• Purpose code: "Gift" or "Family maintenance"

Indian-side bank documentation:

• Inward remittance certificate (FIRC) from an Indian bank
• Source of funds (US tax returns, salary records)

Worked example — annual gifting

You (US person) gift $30,000 to your Indian daughter in 2025.

• Annual exclusion: $19,000 (2025)
• Above exclusion: $11,000
• Form 709 required, $11,000 counts against lifetime $13.61M+ exemption
• No US gift tax due (well under exemption)
• Daughter: no Indian tax (relative gift)

If you'd gifted $19,000: No Form 709, no US tax, no Indian tax.

What about gifting Indian property to Indian children?

NRI (US person) gifts Indian property to Indian child:

• US side: gift of foreign-situs property, US gift tax rules apply
• Indian side: stamp duty on gift deed; capital gains tax if eventually sold by child

For US tax purposes: Foreign-situs gifts (Indian property) are reportable on Form 709 above the annual exclusion but use the same lifetime exemption.

Child's basis in property = your basis (carryover).

Spouse gifts and the foreign-spouse limitation

For a US-citizen spouse: unlimited marital deduction. Can gift any amount.

For non-US-citizen spouse: limited to $185,000/year (2024, indexed). Above that uses the lifetime exemption.

For NRI couples where one is a US person and the other is not: gifting between spouses has a limit.

Common gifting mistakes

• Missing Form 709 for above-exclusion gifts
• Gifting too much to non-US-citizen spouse without planning
• Confusing US gift tax (paid by GIVER) with Indian gift tax (paid by RECIPIENT non-relatives)
• Not documenting the source of funds
• Treating cash transfers across borders as informal

Practical advice