Form 3520 for large gifts from India: thresholds, penalties and late filing

This guide goes deeper on one narrow point: what Part IV of Form 3520 actually requires when family in India sends you a large amount, how the penalty works, and what your options are if the form was missed. For the basics of gifts and loans from relatives, start with money to and from family in India.

Who has to file

A US person (a citizen, green card holder or US tax resident) files Part IV of Form 3520 if, in a calendar year, they receive from foreign sources amounts they treat as gifts or bequests above these levels:

• More than $100,000 in total from non-resident alien individuals and foreign estates, counting related foreign persons together.
• More than a much lower inflation-adjusted figure from foreign corporations and foreign partnerships (and related persons). The IRS lists it as $20,116 for 2025 and $20,573 for 2026.

The test is on the total for the year, not per gift. Ten transfers of $12,000 from different aunts and uncles can cross the line.

What counts, and who is "related"

Amounts to add together include money, property and bequests treated as gifts. Gifts from people you know, or have reason to know, are related to each other, or are acting as a nominee or intermediary for each other, must be aggregated. For this purpose the instructions refer to the related-party rules of sections 267 and 707(b), which cover family members and companies you control by more than 50%.

In practice, a father and mother who each send $60,000 are treated as one source of $120,000. The question to ask is whether the money really came from someone else, such as a relative who is passing it along. Line 56 of the form asks exactly that.

Payments made directly for your tuition or qualified medical costs are not treated as a gift to you, so they do not count towards the total.

Gifts from a company in India are a different category. The IRS may recharacterize "gifts" from a foreign corporation or partnership, for example as income or a dividend, so do not assume the label protects you.

Due date and extension

Form 3520 is not filed with your Form 1040. It is mailed separately, and it follows the dates of your income tax return: April 15 for calendar-year individuals, so April 15, 2027 for gifts received in 2026. If you get an extension for your Form 1040 by filing Form 4868, the Form 3520 date moves to October 15. You tick box 1k on the form and enter the number of the return you extended. The automatic extension is the only one that works: the discretionary two-month extension for people abroad does not extend Form 3520.

What goes on the form

Line 54 asks whether you received more than $100,000 from non-resident aliens or foreign estates. If yes, you list each gift over $5,000 with the donor details. If no single gift is over $5,000, you write that in. Line 55 covers foreign corporations and partnerships. Line 56 asks if the donor was a nominee or intermediary.

Report amounts in US dollars and keep a note of how you converted rupees. Keep the donor's gift letter, the bank advice showing the transfer and, for property, a valuation.

What the form does not do

Filing does not create tax. Foreign gifts are generally left out of your income, and the form is information only. The risk is on the other side: the IRS says that if the form is late, incomplete or wrong, it may determine the income tax consequences of the gift. That is the point where an unreported gift can be argued to be income.

Gifts versus loans

Part IV is for amounts you treat as gifts. A true loan from a parent is not a gift, but "loan" has to be supportable: a written agreement, a repayment schedule and actual repayments. If there is no real expectation of repayment, expect the IRS to see a gift. A loan from a foreign trust is a different matter and is covered in Part III of the form.

Trust distributions

If the money comes out of a foreign trust, it is reported in Part III as a trust distribution, not in Part IV as a gift. Foreign trusts carry their own rules and penalties, so treat that as a case for a professional from the start.

The penalty

For a late, incomplete or incorrect Part IV, the penalty is 5% of the gift for each month the failure continues, up to 25%. On a $150,000 gift, that is up to $37,500, even though no tax may be due on the gift at all.

No penalty applies if you can show the failure was due to reasonable cause and not willful neglect.

If you are late: your options

1. File now. If the IRS has not contacted you and you are not under examination, the IRS procedure for delinquent international information returns says to file Form 3520 under its normal instructions. It is not an amnesty, and penalties may still be assessed.
2. Attach a reasonable cause statement. Write "Reasonable Cause Statement attached" at the top of the first page. The IRS says it considers reasonable cause before assessing a penalty on Forms 3520 and 3520-A filed this way.
3. Explain the facts. A useful statement is factual: what happened, when you learned of the requirement, what you did next, and why you could not file on time. Not knowing about the requirement is weighed together with everything else, so explain what you did to comply once you found out, and show that you were not trying to avoid tax. Reliance on a tax professional, documented ordinary business care and prompt correction all help. Keep the statement to facts and attach evidence.
4. If a penalty notice arrives, respond by the date on the notice, and see IRS letters and notices. Penalties can be contested with the same reasonable cause facts.

Common triggers

• Parents sending money for a house, or a gift of the proceeds of an Indian property sale.
• An inheritance paid out in India. See also selling Indian property.
• Many small transfers from several relatives in one year.

Gifts from a person who has given up US citizenship or long-term residency (a covered expatriate) can bring separate reporting and tax, so mention that to your preparer.

When to bring in a US CPA

Call a US CPA or tax attorney if the gift is large, the donor is a company or trust, the money is an inheritance with several assets, the form is years late, or you have also missed Form 8938 or FBAR for the same money. This guide is general information, not advice for your case.