If you have been living in the US for years, you have probably built real wealth there: brokerage accounts, a 401(k), maybe a property. You also have assets back in India.
What most NRIs do not know is that the US estate tax can take up to 40% of your US-based wealth when you die, and as a non-citizen you get only a $60,000 shield instead of the multi-million-dollar exemption that US citizens receive. Making this harder, there is no US-India estate tax treaty that could give you extra relief.
This guide covers how the tax works, which US assets are exposed, why your India holdings are safe, and what you can do now as part of your NRI estate planning to protect your family.
What is US estate tax and who does it apply to?
Estate tax is a federal tax on the transfer of your assets to your heirs when you die. The rate can reach as high as 40% on the amount above your exemption.
The gap between citizens and non-citizens
US citizens and people who are domiciled in the United States at death receive a large lifetime exemption, currently in the millions of dollars (adjusted annually). For a non-resident alien (NRA), meaning someone who is neither a US citizen nor domiciled in the United States, the exemption is just $60,000. This number has never been adjusted for inflation.
The gap is stark. A US citizen with $500,000 in US stocks owes no estate tax at all. An NRI with the same $500,000 in US stocks faces a tax bill of roughly $142,000.
Domicile, not citizenship, is the deciding factor
The IRS determines whether you are an NRA for estate tax purposes based on your domicile at death, not your passport or visa status. Domicile is the place where you intend to live permanently with no present intention of leaving.
If you have moved back to India and consider it your permanent home, you are an NRA for US estate tax purposes. This applies even if you have not yet surrendered a US green card.
If you still live in the United States and hold a green card, the IRS treats you as US-domiciled. You would qualify for the full multi-million-dollar exemption, not the $60,000 one. When and how you establish Indian domicile affects your estate tax exposure significantly.
Which US assets count toward your taxable estate?
The US estate tax for NRAs covers only "US-situs" property, meaning assets legally situated in the United States.
Assets that are included
The following belong in your taxable US estate:
US marketable securities, including individual stocks, ETFs, and mutual funds held at US brokerages, are US-situs assets. It does not matter where you live or where the account is held.
US real estate of any kind, including your primary home, rental properties, and timeshares, is US-situs property.
Retirement accounts such as 401(k) and IRA balances are included in your US-situs gross estate. If you have $400,000 in a 401(k) when you die as an NRA, that full amount counts. This surprises most NRIs.
US business interests and debt owed to you by US persons or US-based entities also count.
Assets that are not included
Not everything in the US is taxable. The IRS excludes several categories for NRAs:
Regular US bank and savings accounts that are not connected to a US trade or business are not US-situs assets for NRAs. This is a misconception worth correcting: your Wells Fargo or Chase savings account is generally not in your taxable US estate after you leave the US.
US life insurance proceeds payable on the death of an NRA are also excluded from the US-situs gross estate. This makes life insurance a meaningful planning tool, as discussed below.
US government bonds and other securities that generate portfolio interest are excluded.
| Asset type | Included in NRA's US estate? | Notes |
|---|---|---|
| US stocks and ETFs | Yes | Regardless of where you live |
| US real estate | Yes | Includes rental properties and timeshares |
| 401(k) and IRA | Yes | Full account balance included |
| US business interests | Yes | LLCs, partnerships, sole proprietorships |
| Regular US bank accounts | No | Unless used for a US trade or business |
| US life insurance proceeds | No | Excluded per IRS rules for NRAs |
| US government bonds | No | Portfolio interest exemption applies |
| Indian FDs and NRE/NRO accounts | No | Not US-situs property |
| Indian stocks and mutual funds | No | Not US-situs property |
| Indian real estate | No | Not US-situs property |
Your India assets are safe from US estate tax
This is the clearest piece of good news in the whole picture. Your India-based holdings, including FDs, NRE and NRO accounts at Indian banks, Indian stocks, Indian mutual funds, and Indian real estate, are not US-situs assets. The US estate tax has no claim on them.
India adds another layer of relief. India abolished its Estate Duty Act in 1985. There is no inheritance tax or estate tax in India. When your family inherits your Indian assets, they will not owe estate or inheritance tax to either country.
The planning question, for NRIs with assets on both sides, is entirely about the US side.
India has no estate tax treaty with the US
Some countries have negotiated estate and gift tax treaties with the United States. Nationals of those countries who are not US-domiciled can claim a proportional unified credit, meaning their effective exemption is much higher than $60,000.
The IRS publishes the full list of countries with these treaties. It includes the United Kingdom, Germany, Japan, Australia, France, and ten other countries. India is not on that list.
What this means in practice: a UK-domiciled person with $1 million in US stocks and $4 million in UK assets total may be able to claim a proportional credit, covering a significant share of their US estate tax. Rahul, who has $1 million in US stocks and $4 million in assets in India, gets $60,000 and nothing more.
This is the most important planning fact for any NRI: treaty relief is not available. Your NRI estate planning must account for the full $60,000 baseline and nothing above it from treaties.
How to calculate your estate tax exposure
The $60,000 is a filing threshold, not a simple deduction. If your US-situs assets at death exceed $60,000, your executor must file Form 706-NA within nine months of your death. The estate tax rate schedule starts at 18% and rises to 40% on amounts above $1 million.
Take Priya as an example. She has $500,000 in a US brokerage account when she dies as an NRA. The tentative tax on $500,000 is $155,800 per the IRS rate schedule. Subtract the credit equivalent to the tax on the $60,000 threshold ($13,000), and the federal estate tax owed is approximately $142,000. Her family must raise that in cash within nine months just to transfer the brokerage assets.
Allowable deductions include funeral expenses, estate administration costs, and unpaid debts. The marital deduction applies in full only where the surviving spouse is a US citizen.
NRI estate planning steps to reduce your exposure
There is no single fix. The right combination depends on how much you hold in the US, your age, whether you plan to stay or return to India, and your family situation. Here are the main levers.
Know your actual exposure first
Before planning, list every US-situs asset: brokerage accounts, retirement accounts, US real estate, and any business interests. The InvestMates US estate tax calculator gives you a rough estimate in minutes. For a full cross-border plan, work with a qualified advisor who understands both jurisdictions.
Buy life insurance to cover the bill
Here is the most practical move for many NRIs. US life insurance proceeds paid on the death of an NRA are excluded from the US-situs gross estate. Your heirs receive the payout, and it does not add to the taxable estate.
If Priya holds a $200,000 US term policy, her family receives that payout free of US estate tax. They can use it toward the $142,000 bill on the brokerage account. For NRIs still living in the US, securing term life insurance as NRIs is far easier while you have a US address, US income, and access to US insurers. Once you return to India, many US policies become unavailable or significantly more expensive.
Gift US assets while you are alive
The US annual gift tax exclusion lets you give up to $18,000 per recipient per year (2025 figure, indexed annually) without triggering gift tax. Each dollar gifted reduces your US-situs estate by one dollar.
Gifts to a non-citizen spouse have a higher annual limit, currently over $180,000 per year (indexed annually). One important restriction: under IRC Section 2035, gifts made within three years of death may be pulled back into the gross estate. Last-minute gifting shortly before death generally does not work. Start early, ideally years before you plan to return to India.
Repatriate US assets before your return becomes permanent
The years before you fully establish Indian domicile are a planning window. If you convert or move US-situs assets to India while still treated as a US tax resident, those assets exit the US taxable estate framework. Model the income tax consequences with an advisor before acting.
For your NRI retirement planning, the timing of when you begin withdrawals, roll over, or convert 401(k) and IRA accounts relative to your change of domicile matters for both income tax and estate tax. Getting this sequence right can save your family tens of thousands of dollars.
Watch how you hold US real estate
US real estate is always US-situs regardless of ownership structure. Some NRIs hold US property through a US LLC, and whether that changes estate tax treatment for NRAs is a complex, fact-specific question. Do not restructure real estate holdings without advice from a cross-border estate attorney.
RSUs and vested stock options
If you have vested RSUs (restricted stock units) sitting in a US brokerage account, those shares are US-situs assets included in your taxable estate. This is what InvestMates covers in detail in the guide on the US estate tax trap for NRIs with RSUs. If RSUs make up a meaningful portion of your US wealth, that article covers your specific exposure in full.
What your executor must do after you pass
If your US-situs assets exceed $60,000 at death, your executor must file Form 706-NA within nine months. A six-month extension is available using Form 4768, but the tax is still due on the original deadline. Interest accrues on unpaid amounts from day one.
Before US assets can be transferred to your heirs, US financial institutions require a transfer certificate from the IRS. This certificate confirms the estate's tax status and can take months to obtain. Your heirs may be unable to access the funds until it arrives.
Your executor will need: the death certificate, the original will (translated into English if written in another language), asset appraisals at the date of death, and copies of any US gift tax returns you filed. Keeping a simple record of your US assets and account details now saves your family considerable time later.
Conclusion
Your India assets are safe from US estate tax, and India has no estate tax of its own. The exposure is entirely on the US side: stocks, retirement accounts, and real estate above $60,000 face rates up to 40%, with no treaty relief for Indian nationals. Solid NRI estate planning begins now, not when you book your return flight. Start with a full list of your US-situs assets, then work with a cross-border advisor on the right combination of life insurance, gifting, and timing.
Frequently asked questions
Does US estate tax apply to my NRE/NRO accounts and India FDs?
No. NRE and NRO accounts held at Indian banks are India-situs assets and are not subject to US estate tax. Indian fixed deposits, Indian mutual funds, and Indian real estate are also not US-situs property. The US estate tax applies only to assets situated in the United States. Your India holdings are not at risk, and India does not have an estate or inheritance tax, so they pass to your heirs free of tax on both sides.
Does a non-US citizen get an estate tax exemption?
Yes, but a very small one. A non-resident, non-citizen decedent receives a $60,000 filing threshold. If your US-situs assets at death total $60,000 or less, no Form 706-NA is required and no estate tax is owed. Above that amount, estate tax applies at progressive rates reaching up to 40%. By contrast, US citizens and US-domiciled individuals receive a multi-million-dollar exemption adjusted annually for inflation. The $60,000 for non-residents has not been adjusted since it was set.
Does my 401(k) count toward US estate tax if I return to India?
Yes. Your 401(k) and IRA balances are included in your US-situs gross estate as an NRA. If you die after returning to India with $400,000 in a 401(k), the full balance is included in the calculation. The tax on that amount can be substantial. As part of your broader RSU tax planning and US exit strategy, timing when you begin withdrawals or conversions relative to your change of domicile is a key decision that a cross-border advisor can help you model.
Is there a US-India estate tax treaty that can reduce my exposure?
No. The IRS publishes the complete list of countries with US estate and gift tax treaties. India is not on that list. Countries such as the UK, Germany, Japan, and Australia have treaties that allow their nationals to claim proportional credits. Indian nationals have no such protection. This is one of the most consequential planning facts for NRIs: proactive NRI estate planning is the only way to reduce your exposure because no treaty will do it for you.