What is the best mode to transfer money from India to USA?
Only legal process are, 1) via your/parents India bank to your US account up to 7.5 lakhs free without gift tax per year, beyond that would incur additional gift tax both required CA statements and tax filing returns in India 2) getting cash up to $10k while traveling from India to USA.
The limit is based on Indian financial year. This usually April to April.
If you have a NRO account and source of income, talk to your auditor, prepare Forms 15C and 15B and initiate a wire transfer from your NRO account to your US Bank account.
You have to pay the due taxes in India and claim the tax credit here in USA
Your parents can send money for your kids education expenses with a bill from the school if you have any expenses like that
Otherwise now if they want to gift money in USD without any specific expenses the bank will deduct TDS, around 20% + the surcharges, for the amount they are sending here.
we are not sure about the 7.5L gift limit.
If we send it from my personal account to US account and they apply the TDS, RBI & other fees.
Please feel free to share your comments.
More details in the following resources
How much money can I send from India to the USA?
For each money transfer from India to the USA, you can send the INR equivalent of:
$10,000 for education purposes.
$5,000 for other purposes – such as exam fees or medical treatment costs.
An annual limit equivalent to $250,000 applies each financial year, which goes from April 1 to March 31.
https://www.westernunion.com/us/en/send-money-from-india-to-us.html
If you are planning to settle in the USA after your retirement and your parents in India are getting older and they could not manage your real estate assets, it is better to start planning the process now and gradually to move the assets from India and divest the funds by buying real estate properties in the USA or use the funds for kids college education purposes or invest the funds based on your family personal finance objectives.
After retirement, If you are planning to settle 6 months in India and 6 months in the USA but your kids are going to settle in the USA, it is still advisable to consolidate the investments and limit the real estate exposure in India if you are kids are going to inherit the assets in India.
Please understand that your kids in the USA will have a tough time handling this process in India unless you expect great asset appreciation which will offset the currency loss and inflation in India and your parents are in a good position to monitor these assets while you are living in the USA. You might face major challenges with inherited properties if the documents are not clear and drastic difference between market value & guide book value.
Once you are planning to sell any of your properties in India and repatriate the funds from India to the USA. Please consider the following strategies & options to minimize tax impacts and tax complications from India and the USA.
Situation 1: You are the legal owner of this property in India and you bought this property using the funds from the USA.
TDS: The buyer will deduct TDS from the sale consideration regardless of the amount and TDS rate will be 12.5% if property is held for more than 24 months; 30% if held for less than 24 months. Surcharge also applies on the TDS based on the property market value.
You will receive the funds to your NRO account, and you have to submit forms 15CA/CB with the help of a chartered accountant in India and you can repatriate the funds from NRO account to your bank account in the USA.
You must file tax returns in India and calculate capital gains tax and pay the taxes after claiming the TDS credit and could receive tax refund if you paid more than the calculated tax liability.
If you sold the property at a loss or the actual gains are very small you could consider applying for a lower deduction certificate option.
On the US side, you have to report this capital gain from the sale of the property and report it under foreign income and do the foreign tax credits adjustment based on your tax situation. You will not pay double taxes since India and the USA are part of the double tax treaty. Please work with the CPA in the USA to report it correctly as part of your income tax return.
Situation 2:
When you inherit an ancestral property through settlement deed or WILL and then sell it in India:
TDS rules and fund repatriation rules are the same as Situation 1. If the ancestral property is an agricultural land and no capital gains tax applies in India
You can inherit agricultural land via a WILL, but you can never purchase agricultural land, farm houses, or plantation property in India as an NRI.
On the US side, you have to report this capital gain from the sale of the property and report it under foreign income and do the foreign tax credits adjustment based on your tax situation. You will not pay double taxes since India and the USA are part of the double tax treaty. It is the same as situation 1 but your cost basis in the USA will be stepped-up based on the date you have inherited, and the capital gains calculations will be different from India. Please work with the CPA in the USA to report it correctly as part of your income tax return.
Situation 3:
When You Are Not the Legal Owner of the real estate property and in this scenario, your blood relative (father, mother, brother or sister) is the legal owner of the property in India
. The legal owner sells the property and receives the sale consideration. The money will be subject to capital gains tax in India for your relative (for long-term capital gains taxed at 12.5%) Your relative reports this in their tax returns and pays taxes. Buyer would have deducted 1% TDS if sale consideration exceeded Rs.50 lakhs (this TDS rate is specific for resident Indian only) Your relative transfers your portion to you as a “GIFT FROM RELATIVE”. This transfer occurs under the Liberalized Remittance Scheme (LRS) with a maximum limit of USD 250,000 per financial year. When such a transfer happens, tax deduction (TCS) comes into play. After receiving the gift from a relative, it is advisable to report that “gift” as “exempt income” in your tax returns in India.
TCS: For transfers less than Rs.10 lakhs in a financial year: No TCS collected For transfers of Rs.10 lakhs or more: 20% TCS collected on the amount exceeding Rs.10 lakhs.
Money received falls under “Gift from Relatives”. As per RBI, relatives include spouses, parents, siblings, children, and their spouses. In your case, you can receive gifts from your father and brother only.
It is always safe to execute a simple notarized gift deed in stamp paper to receive lump funds from relatives. Banks may require gift deeds when NRIs transfer gifted funds abroad.
Liberalized Remittance Scheme (LRS) Transfers occur under LRS, allowing resident Indians to remit funds abroad. Maximum transfer is USD 250,000 per financial year for various reasons including gift.
Account for Remittance Your relative can either transfer it to your abroad bank account or NRO A/c in India. Later, if you want to remit your funds from NRO A/c abroad, there should be a report called Form 15CA-CB from a Chartered Accountant. This has to be produced to the banker. No tax implications for this.
Your relatives can gift to you within the limits of USD 250,000 provided the source is duly reported in their tax returns in India. The source should be clear.
Disclose gifts under “exempt income” in your tax return in India. You need to file a gift form as part of your tax return filing in the USA.
On the US side, You will not include this as part of your income tax return. You will have to file form 3520 with the IRS if the gift amount is over $100,000. Please work with the CPA in the USA to report it correctly as part of your income tax return.
In summary, you have to work with a knowledgeable chartered accountant and CPA in the USA to handle your tax paperwork in both countries to avoid any future audit or tax issues from either country.
Please share it with your friends who are currently selling any properties in India or going through this process now and it can help them.
If you need help regarding tax compliance for India and the USA, please reach out to me and our CA and CPA can cover both countries and take care of tax compliance for you.
Thanks
Mari