Cross-Border Gift and Inheritance Planning for U.S. Indian Assets

(INDIA) A growing number of Indian-origin families with ties to the United States are racing to line up cross-border planning for gifts and inheritances involving Indian assets, as advisers warn that missteps can trigger taxes and reporting trouble on both sides of the ocean. The issue has sharpened in recent months as U.S. Gift and estate thresholds for 2025 come into view and as global mobility rebounds, with students on F-1 visas, H-1B workers, and green-card applicants holding property, shares, and bank accounts in India that may later transfer to relatives across borders. Lawyers and accountants say the lack of an estate or gift tax treaty between the two countries, along with different cost-basis rules for inherited property, is catching even seasoned professionals off guard.

At the core is a straightforward but often overlooked point: the United States taxes its citizens, green-card holders, and other U.S. tax residents on worldwide assets for estate and gift purposes, while India taxes capital gains when assets are sold and treats gifts and inheritances differently from the American system. Under U.S. rules, it is the donor—the person making the gift—who may face gift tax during life, subject to an annual exclusion and a larger lifetime exemption that also covers estate tax. In India, gifts between certain relatives are generally exempt in the hands of the recipient, and there is no inheritance tax when the property passes on death, but the Indian tax cost basis the heir inherits is usually the original owner’s cost, not a reset value. That split creates a planning trap, especially when one jurisdiction offers a “step-up in basis” and the other does not.

Accountants describe cases where a parent in India gifts a stake in a closely held company to a child who has become a U.S. tax resident, only for the family to discover that the U.S. donor rules, reporting duties, and the future sale of the Indian shares will collide in ways they did not expect. “The assumptions people make—like ‘India doesn’t have inheritance tax so there’s no planning to do’—often don’t hold once the U.S. system gets involved,” said a New York-based cross-border tax attorney who routinely advises Indian diaspora clients. “The timing of the transfer, who the donor is, where they reside for tax purposes, and which country’s rules shape cost basis—those details move real money.” According to analysis by VisaVerge.com, the issue becomes even more complex when asset transfers occur while the recipient is on a temporary visa in the United States and must also keep immigration filings clean and consistent with long-term plans.

For those making gifts, U.S. Gift rules focus first on the donor and apply regardless of where the asset sits. The law provides an annual exclusion—set around $19,000 per recipient for 2025—that can shelter many routine transfers, along with a far larger lifetime exemption of about $13.99 million for 2025 that unifies gift and estate tax. Practitioners say families often misunderstand this structure and assume gifts of Indian assets fall outside the U.S. system because the property is abroad. That is not the case: a U.S. citizen, green-card holder, or U.S. tax resident who gives an interest in Indian real estate or shares may need to file Form 709 with the Internal Revenue Service to report the transfer, even if no tax is due because the exemption covers it. The IRS offers instructions on the gift tax framework and filing on its official website, and taxpayers can find general guidance on the agency’s gift tax page and the filing details under About Form 709.

On the Indian side, tax consequences often arise not at the moment of gift or inheritance but later, when the recipient sells the property. If a daughter receives a flat in Mumbai from her U.S.-person parent and sells it years later, Indian capital gains tax applies using the original cost—often much lower than the current value—subject to indexation rules depending on holding period. That can produce a larger Indian tax bill than a family expects if they assumed a reset at death or gift. “People hear the U.S. phrase ‘step-up in basis’ and think it applies everywhere,” an adviser in Mumbai noted. “In India, the cost basis usually carries over. The result can be a large gain on sale for the heir, regardless of U.S. income tax treatment.”

Estate planning on death introduces another mismatch. Under U.S. rules, the cost basis for inherited assets generally resets to fair market value at the date of death, a feature known as a “step-up in basis.” That step-up can reduce U.S. income tax when the heir later sells the asset. But if the property is in India and the sale takes place there, Indian capital gains rules usually look to the original cost, not the stepped-up figure, for Indian tax purposes. Put simply, the same sale might produce very different numbers depending on which country’s rules apply. Families with Indian assets and U.S. heirs need to decide where, when, and by whom a sale will occur. Without careful cross-border planning, a well-meant inheritance can leave heirs with cash needs to pay taxes in one country before the property sells in another.

The lack of a treaty specific to estate and gift tax between the two countries has become a flashpoint. Experts stress that while income tax treaties may help with double taxation of income in many contexts, there is currently no U.S.-India estate or gift tax treaty, which means the usual credits and coordination tools that exist elsewhere are not available. That absence raises the stakes for U.S. families with Indian assets, since even routine planning steps—like a lifetime gift to lock in a lower valuation—may lead to a different outcome once Indian law and later sales come into play. “It’s not that cross-border planning is impossible,” one cross-border accountant said. “It’s that you need to thread the needle so the U.S. goal you meet doesn’t blow up the Indian side, and vice versa.”

Reporting remains a second pressure point for U.S. persons who receive or hold foreign property. U.S. residents who get large gifts or inheritances from abroad may have to file Form 3520, a disclosure for certain foreign gifts and bequests, even if no U.S. tax is due at that moment. The IRS directs filers to specific instructions under About Form 3520. Separately, Americans with financial accounts in India above certain thresholds must file a yearly foreign bank report, commonly called the FBAR, through the U.S. Treasury’s Financial Crimes Enforcement Network; the agency explains the process on its official page for the Report of Foreign Bank and Financial Accounts. In addition, some taxpayers must report foreign financial assets to the IRS using Form 8938, with details listed under About Form 8938. Advisers say missing these forms can trigger penalties and, in rare cases, raise follow-on questions that complicate immigration filings.

Students on F-1 visas and early-career workers on H-1B status are part of the story because they often become U.S. tax residents while they still have ties back home. When those individuals receive a gift from parents in India—a bank transfer for tuition, an apartment title, or shares in a family company—they may need to file U.S. forms even if the family assumed the transfer would stay private within India. A campus tax clinic attorney described cases where a small gift during studies snowballs into a file of missed disclosures by the time the student moves to H-1B. “By the time someone is applying for a green card, the last thing they want is a paper trail that looks messy,” the attorney said. “You want to be able to show clean, timely reporting of foreign gifts and accounts, not an avoidable pattern of late forms.”

Timing also matters for families considering whether to gift now or pass assets on death. U.S. rules allow many to make lifetime gifts without immediate tax due, thanks to the large exemption, and gifting can remove future growth from the donor’s taxable estate. But heirs may benefit far more, on the U.S. income tax side, if they inherit and receive a step-up in basis instead of getting the property during life. The right choice depends on family goals and where taxes will be paid. If an heir expects to sell the Indian asset and pay Indian capital gains, the lack of a step-up in India may reduce the appeal of inheritance for that particular asset. Families are weighing these trade-offs with care because once a gift is made, it is hard to unwind without new costs.

Ownership structure in India has become another focus area. Some families hold assets directly in their names. Others use Indian companies or trusts. Each path has different consequences for control, succession, and tax reporting in both countries. For U.S. persons, holding shares in a foreign company can trigger extra U.S. reporting and complicated anti-deferral rules, while an Indian trust can create a separate set of obligations, especially if the U.S. person is a grantor or beneficiary. Though the source rules are complex, the principle is simple: the way you hold Indian assets can change the U.S. and Indian tax picture upon gift or death and can alter which forms are required each year.

Cross-border planners repeatedly stress the need to build liquidity into estate plans that include Indian property, in case U.S. estate tax arises and cash is needed to pay it. Indian real estate or family company stakes may be hard to sell quickly at a fair price, and exchange controls and procedural steps can slow access to funds. Families with globally scattered assets are turning to life insurance or earmarked cash pools to avoid a forced sale during probate. They also keep a close eye on banking channels and documentation in India so that heirs can move funds after a sale without delays that outlast U.S. payment deadlines. These issues do not grab headlines until a death occurs, but they are the types of friction that shape results for families in real time.

Lawyers in both countries say separate wills for assets in each jurisdiction can reduce delay and confusion. With one will covering Indian assets under Indian succession law and another will or trust handling U.S. property, executors can move faster and avoid conflicts of law that arise when a single document tries to serve two systems at once. Those documents must be drafted to work together, so that a bequest in one does not contradict the other. Families who live abroad for work—especially digital nomads who move frequently—face extra steps to keep addresses, residency claims, and document storage up to date. A clean paper trail can make the difference between a smooth transfer and a long stretch of phone calls across time zones.

The absence of a treaty also shapes how taxpayers rely on credits. While a U.S. person who sells Indian property usually can claim a foreign tax credit in the United States for Indian capital gains tax paid, planners warn that the credit mechanics can be tricky and do not fix a poor choice of timing or ownership structure. If the gain is taxed at a higher rate in India than the U.S. rate for that asset class, foreign credits may soak up U.S. tax for the year but still leave less after-tax cash than a better-planned sale would have produced. Conversely, if Indian tax is lower or deferred, U.S. tax may be due in the same year the Indian sale closes. Families are not trying to play tax arbitrage so much as they are trying to avoid paying more than they need to pay because two different systems touch the same event.

The choice between lifetime gifts and inheritance becomes even more delicate when heirs live in different countries. A son in California may face one set of reporting rules and tax rates, while a daughter in Bengaluru has a different path. If the parent gifts an Indian apartment to both children now, the U.S. donor may need to file Form 709 to cover the transfers beyond the annual exclusion, while the children will later face Indian capital gains on sale using the parent’s historic cost. If the parent instead holds the apartment until death and bequeaths it, the U.S. heir may enjoy a step-up for U.S. income tax, but the Indian sale still tracks back to original cost for Indian tax. Advisers compare scenarios like these with families in real time, since the best answer often depends on family needs rather than a one-size rule.

Compliance failures remain the quiet spoiler in many cases. For U.S. receivers of large gifts or inheritances from abroad, timely filing of Form 3520 is essential even when no tax is due; it documents the transfer and helps close the loop for examiners. For foreign bank accounts in India that meet thresholds, the Treasury’s FBAR filing is mandatory, separate from tax returns, and due each year to the government’s financial crimes bureau. The IRS’s Form 8938 adds another reporting layer for some taxpayers with foreign financial assets. Practitioners urge families to bookmark the official pages—About Form 3520, Report of Foreign Bank and Financial Accounts, and About Form 8938—and to compare thresholds and due dates as roles shift from student to worker to permanent resident.

Mobility adds a twist because tax residency does not always match immigration status in simple ways. An F-1 student from India may become a U.S. tax resident under the substantial presence test after a set period, even though their visa is temporary. A digital nomad with a U.S. partner visa may still be treated as a U.S. tax resident for part of the year, bringing Indian assets within U.S. reporting reach for that period. Families making gifts during these transitions need to confirm whether the donor or the donee is a U.S. tax resident at the moment of transfer, and what that means for filings. Even a short-term presence can pull a transfer into a different set of rules if it crosses a tax residency line that year.

As the calendar turns, families are also watching the annual exclusion increase and the level of the lifetime exemption. While experts expect the annual exclusion of about $19,000 per recipient in 2025 to cover many day-to-day gifts, the larger lifetime exemption near $13.99 million remains the main lever that allows wealthy donors to give or bequeath assets without immediate U.S. tax due. The figures help frame strategy, but advisers caution against chasing numbers without context. If a gift of Indian shares today prevents a better tax outcome on a later sale in India, the nominal U.S. benefit can be overshadowed by a higher Indian bill. Choices that look tax-smart in one country can fall flat when both are counted together.

The tone among planners is calm rather than alarmed. In most cases, families can reach a steady, low-risk path by pairing U.S. Gift rules with Indian capital gains rules, filing the right forms on time, and keeping immigration filings consistent. The headaches come from assumptions. “A lot of the grief is avoidable,” said a Los Angeles CPA who works with Indian clients. “Inventory what you own in India, figure out your tax status, map who will receive what and when, and decide whether a lifetime gift or an inheritance lines up with those goals. Then put the reporting on a calendar so nothing is missed.” That work does not make headlines, but it can prevent bigger costs later.

For those who plan to pass property to children still living in India, early lifetime gifting can make sense if the goal is to remove future growth from a U.S. estate and align ownership with where the asset sits. Families choosing that route try to use the annual exclusion each year, with larger gifts covered by the lifetime exemption and properly reported on Form 709. Others prefer to wait and use inheritance to aim for a U.S. step-up, accepting that India may not mirror that result. In both cases, the details of title transfer in India, registration, and clear documentation prove just as important as the U.S. side of the plan.

The result is a more deliberate approach to Indian assets among U.S. families who once saw them as a problem for another day. Bank accounts, demat accounts, flats held for decades, and family business shares are being reviewed with fresh eyes. Some families are simplifying, selling assets that are too hard to manage from abroad and reinvesting in ways that reduce cross-border friction. Others are restructuring, moving ownership into vehicles that fit both systems better. And many are preparing heirs, teaching them how Indian sale rules work and what documents they will need so that, when the time comes, the process is not a scramble.

Officials in both countries do not comment on individual planning choices, but U.S. agencies make the filing expectations plain through official guidance. The IRS’s gift tax page explains donor duties and refers filers to Form 709; the agency’s Form 3520 page outlines disclosures for large foreign gifts; and the U.S. Treasury’s FBAR page describes how to report foreign accounts each year. For many families, these links have become bookmarked tools as much as they are rules, guiding a more careful style of cross-border planning that respects the differences between the two systems.

In the end, the push this year is less about a single tax change and more about a new habit: treat Indian assets as part of one global balance sheet when you have U.S. ties, and line up both countries’ rules before a gift or inheritance takes effect. Families who do that find fewer surprises. Those who do not often discover, at the worst time, that the two systems can collide. The choice between giving now or passing on death, the pull between a U.S. step-up and India’s original cost, the weight of forms like Form 709, Form 3520, and the FBAR—these are not abstract ideas. They decide how much of a lifetime’s work reaches the next generation, and how calmly that handover takes place. For Indian-origin families who live, study, and work across borders, the message is clear: plan the transfer with the same care you used to build the asset, and remember that the asset’s path matters as much as its price.