Money to and from family in India: gifts, loans and Form 3520

Family money crossing the border is usually not taxable. It is however often reportable, and the penalties for not reporting are out of proportion to the sums involved.

Receiving a gift from family in India

A gift is not income to the US recipient. But if a US person receives more than $100,000 in a year from non-resident individuals (adding up gifts from all of them), they must file Form 3520 to report it. The penalty for not filing is 5% of the gift for each month of delay, up to 25%.

Typical cases are parents sending money for a house down payment, or a gift of the proceeds of a property sale. A bank transfer reference that says "gift" does not substitute for the form. The threshold is much lower, about $20,000 ($20,116 for 2025), for gifts from foreign corporations and partnerships.

Keep a gift letter from the donor and bank evidence. Mortgage lenders ask for them too.

Loans from parents

A loan is not a gift, but it needs to look like a loan: a written note, a rate that is at least the IRS minimum, and repayment. A loan that is never repaid and has no documents may be treated as a gift and reported on Form 3520, or the interest forgone may have to be considered.

Sending money to family in India

You, the donor, are the one who files. A US person who gives more than $19,000 to any one person in a year (2025 and 2026) files Form 709 to report it. No tax is paid until the lifetime exemption (about $15 million for 2026) is used up, so it is a reporting form for most. A gift to a spouse who is not a US citizen has a higher annual limit ($190,000 in 2025, $194,000 in 2026).

Paying a relative's medical or school fees directly to the provider is excluded from gift reporting.

On the Indian side, transfers go out and in through the banking system under FEMA rules. Remittances from India from NRO accounts are limited to US$1 million per financial year with the right certificates (Form 15CA and 15CB under the old rules, Forms 145 and 146 under the 2026 Income-tax Rules).

Inheritances

An inheritance from a non-resident individual is not income. It is reported on Form 3520 above $100,000, in the same way as a gift. The assets you inherit take a stepped-up basis equal to their market value at the date of death, so a later sale of the Indian property or shares is taxed on growth since that date, not since the owner bought them. A gift received while the donor is alive is different: you take the donor's original basis.

Inherited Indian bank accounts and securities are also FBAR and Form 8938 items from the moment you have a financial interest in or signature authority over them. Parents who add your name as joint holder on their accounts can also create an FBAR obligation for you.

India's rules in brief

India does not tax gifts from specified relatives, and inheritances are not taxed. Gifts from non-relatives are taxed in full if they total more than Rs 50,000 in the year. Both are subject to documentation. The income from the inherited asset later is taxable in India as usual, and the sale of an inherited property is dealt with in the property sale article.