If your parents in India gift or leave you money, property, or gold, no US gift or estate tax applies, no matter the value, because that tax only reaches assets sitting inside the US. The real risk isn't tax. It's the IRS paperwork you owe once the transfer lands in your hands.
Why foreign gifts and inheritance sit outside US estate tax
The situs rule, plainly stated
A non-resident alien, the term for someone like your parent who holds no US citizenship or green card, only owes US gift or estate tax on US-situs assets. That means US real estate, US stocks held directly, and tangible property physically located in the US.
An apartment in Pune, a post office deposit, gold sitting in a locker in Chennai: none of it is US-situs. It never enters the US transfer tax system, so there's no exemption to exceed and no rate to apply.
Where families get this wrong
This is a misreading I see repeatedly with NRI families. Clients hear about the $60,000 exemption for non-citizens and assume it caps what their parents can pass down, then worry over property worth far more than that.
The $60,000 figure only matters when a non-resident alien personally owns assets sitting inside the US, a US brokerage account or a Florida condo, for instance. It has nothing to do with a house or gold sitting in India.
Your own green card status doesn't change any of this. What matters is your parent's status and where the asset physically sits, not your citizenship.
What the IRS actually wants from you: Form 3520, not tax
The $100,000 trigger
Receiving the gift or inheritance isn't taxable income to you under IRC Section 102, whether it arrives as a lump sum, a property transfer, or gold. What you owe the IRS is a filing, not a payment.
Once gifts from your parents combine to more than $100,000 in a calendar year, you file Form 3520, Part IV, with your return. The IRS treats related donors as one source, so your mother sending $60,000 and your father sending $60,000 in the same year still crosses the threshold together.
The same $100,000 trigger and the same form apply to an inheritance, and there's no floor below it. A $40,000 inheritance needs no Form 3520 at all.
Missing the deadline
Miss it, and the penalty runs 5% of the gift's value per month you're late, capped at 25%, with a $10,000 minimum. Form 3520 files separately from your Form 1040 and doesn't get swept up automatically in a tax-filing extension, so track its own due date.
For the mechanics of actually completing it alongside Form 8938, I've covered that in a separate walkthrough.
Gift now or inherit later: the cost basis call that actually matters
Since there's no US tax on the transfer itself either way, the real decision your family faces is timing, and it changes what you owe when you eventually sell.
A lifetime gift carries your parent's original cost forward to you under IRC Section 1015. Leaving the same asset to you by will instead steps your US basis up to fair market value at death under IRC Section 1014. Same asset, same value, a very different capital-gains starting point.
Take Priya, whose parents bought a Mumbai flat in 1990 for roughly $12,000 in today's dollars. It's worth $180,000 now. Gift it to her this year, and her US basis stays at $12,000; sell later for $200,000, and she reports a US gain near $188,000.
Leave the same flat to her in the will instead, and her basis resets to $180,000 at death. The same $200,000 sale then produces a US gain of about $20,000.
India's side of the ledger doesn't move either way. It keeps the original indexed cost regardless of route, since India never steps up basis on a gift or an inheritance the way the US does.
If the asset is Indian mutual funds or ULIPs rather than property or cash, there's a separate wrinkle worth checking before the transfer happens. Gifted fund units can carry PFIC exposure once a US person owns them, which I've written about separately.
Who this applies to
This covers a non-resident parent, someone with no US citizenship or green card, giving foreign-situs assets to a child who files US taxes as a citizen or green card holder. It doesn't matter whether you live in the US or have moved back to India yourself; your US filing status travels with you.
It doesn't cover the reverse direction: a US-based child gifting money to parents in India follows the ordinary US gift rules for a US person, including the annual exclusion most people already know about.
It also doesn't cover a parent who holds US-situs property directly. That estate faces the $60,000 exemption problem this article just ruled out for foreign assets, and it's a different planning conversation entirely.
What to do about it
- Add up every gift from both parents for the calendar year before assuming you're under $100,000.
- File Form 3520, Part IV, by your return's due date once you cross it, extension or not.
- Keep the gift deed, succession certificate, or probate order, plus the wire transfer records. You'll want them for the US filing and to head off an unexplained-credit question if India's tax department ever asks your parents about the transfer.
- Decide gift-versus-inheritance with the actual appreciation numbers in front of you, not by reflex. A highly appreciated asset usually favors waiting, given the US step-up; urgent family need or a fast-depreciating asset can flip that.
- If the estate needs to move the actual sale proceeds out of India, that follows India's own outward remittance rules, which I've covered in a separate remittance guide.
- Once you personally hold any resulting foreign account, check it against the FBAR and Form 8938 thresholds separately. Those obligations start the moment the account is yours.
Common misreadings
"The $60,000 exemption limits what my parents can leave me." It doesn't. That number applies only when the non-resident parent owns US-situs assets, never a foreign one.
"Form 3520 means I owe tax on the gift." It doesn't. It's an information return. The gift itself was never taxable income to you.
"India has no gift tax, so there's nothing to file anywhere." India's exemption for gifts from a parent doesn't touch your separate US reporting duty. The two systems don't talk to each other.
If you've already crossed $100,000 from your parents this year, get Form 3520 filed by your return's due date; it doesn't extend itself with your 1040. Past that, the real conversation with your parents is about timing, not US tax exposure. I walk NRI families through that math often, worth doing before the transfer, not after.
Frequently asked questions
Does the $60,000 non-resident alien estate tax exemption limit what my parents in India can leave me?
No. That exemption applies only to US-situs assets a non-resident alien owns directly, such as US real estate or a brokerage account, and property, cash, or gold in India never enters the calculation. If your parent does hold US assets directly, see estate planning for non-citizens instead.
Do I owe Indian tax if my parents gift me their house or gold?
No. Under Section 56(2)(x) of India's Income Tax Act, gifts from a lineal ascendant, your parents, are fully exempt with no upper limit. Keep a registered gift deed for large or high-value items so the transfer has a paper trail.
Should my parents gift me their Indian property now, or leave it to me in their will?
It depends on the appreciation. If the property has gained significant value, waiting usually wins you a stepped-up US cost basis at death instead of your parents' original cost. If your family has an urgent reason to move it now, that can outweigh the basis difference, but run the actual numbers first.
Do I need to report an inheritance from India if it's under $100,000?
No. Form 3520 applies once gifts or inheritance from related foreign persons cross $100,000 in a year. Below that, there's no IRS filing on the transfer itself, though a foreign account you now hold still needs its own FBAR or Form 8938 check, and the filing steps for crossing it are here: Form 3520 and 8938 steps.