Introduction: Passing Wealth-Without Blowing Up Your Tax Bill
For many Indian-American families, planning how to pass assets-both in the U.S. and India-is emotionally and financially significant. Yet, most CPAs unfamiliar with cross-border estate tax rules miss key strategies, triggering unnecessary taxes, surprise estate filings, or tax on inherited property.
At Kewal Krishan & Co, we guide Indian families through US estate tax planning, gift strategies, treaty benefits, and inheritance rules-helping preserve your legacy and minimize tax leakages.
Key US Estate & Gift Tax Laws (2025 Update)
- IRC §2001 et seq. governs U.S. federal estate tax.
- IRC §2501 et seq. governs gift tax.
- Unified credit / basic exclusion: In 2025, the exclusion amount is approximately $13.61 million per individual (indexed).
- Annual gift tax exclusion: $17,000 per donee in 2025 (indexed).
- IRC §2642 for generation-skipping transfer tax.
- U.S.-India Estate & Gift Treaty (if ratified/operative in relevant cases): Dictates how mutual credits or exclusions apply (though, as of now, the U.S.-India treaty does not fully eliminate US estate tax on Indian property).
What Indian Families Must Know
- US Estate Tax Applies to Worldwide Assets for U.S. Residents
If you’re a U.S. citizen or resident (green card holder or meeting substantial presence), your worldwide estate is subject to U.S. estate tax-with credit only for foreign death taxes paid. That includes Indian property, bank accounts, shares, real estate, etc.
- Nonresidents Are Taxed Only on U.S. Assets
If you’re a nonresident alien for estate tax purposes, US estate tax generally applies only to U.S.-situated assets (e.g. U.S. real estate, stocks of U.S. corporations).
- Indian Property Transfers Are Often Overlooked
Many don’t realize that assets in India may trigger Indian estate tax rules (if applicable) and may be subject to U.S. tax when your estate returns are prepared.
Gift Strategies & Annual Exclusions
- You can gift up to $17,000 per donee in 2025 tax-free without using your lifetime exclusion.
- Married couples may “split gifts” to double this to $34,000 to a single donee (if you file jointly).
- Gifts beyond exclusion consume your unified credit / lifetime exemption.
- For Indian assets gifted before becoming U.S. residents, foreign gift law Form 3520 may apply.
Example: U.S. Resident with Indian Property
Scenario:
Rahul is a U.S. permanent resident. He owns an apartment in Mumbai valued at ₹2 crore (~$240,000). He also holds U.S. real estate worth $1.5 million.
Upon his death:
- His world estate is $1.74 million.
- Because this is below the 2025 exclusion, his estate owes no U.S. estate tax.
- Without planning, Indian “inheritance tax” (if applicable in local state) might apply.
- But if Rahul had gifted ₹50 lakh (≈$60,000) to his child in 2025, that uses part of his lifetime exclusion.
Step-by-Step: Estate & Gift Planning for Indian Families
- Determine your U.S. residency classification for estate tax
- Identify your worldwide assets (both U.S. and Indian)
- Use annual gift exclusion (IRC §2503) to pass value tax-free
- Structure lifetime gifts carefully – use the unified credit
- Document gifts properly (gift deeds, valuations, currency conversion)
- Consider trust strategies (domestic irrevocable trusts, GRATs)
- Evaluate Indian succession laws and tax overlap
- Prepare a U.S. estate tax return (Form 706) if estate exceeds exemption
- Use foreign tax credits for any Indian death taxes paid
- Review and update periodically as laws and values change
Recent Law Updates to Note (2025)
- The unified exclusion amount and gift exclusion are indexed for inflation each year.
- No new India-U.S. estate tax treaty changes currently in effect, but regulatory guidance may evolve.
- IRS is increasing scrutiny on cross-border estates and foreign property holdings.
- Form 706 filings for estates with U.S. assets remain complex and rarely overlooked.
Conclusion
Estate and gift planning for Indian-U.S. families is one of the highest-impact tax strategies you can implement. A few proactive moves-using annual exclusions, accurate valuations, trust structures, and knowledge of treaty effects-can preserve millions in value.
Allow Kewal Krishan & Co to help you design a customized estate plan that respects both Indian and U.S. rules, protects your heirs, and avoids surprise tax burdens.
Call to Action
Anshul Goyal, CPA EA FCA is a licensed U.S. CPA and IRS Enrolled Agent. He specializes in cross-border estate, gift, and succession planning for Indian-U.S. clients. If you have Indian property or assets to bequeath or gift, consult us to optimize your plan.
About Our CPA
Anshul Goyal offers in-depth expertise on U.S.-India tax issues including estate tax, succession, gift reporting, FBAR/FATCA compliance, and strategic structuring to protect your family’s wealth across countries.
Disclaimer
This blog is for informational purposes only and does not constitute legal or tax advice. Estate, gift, and international tax laws are complex and fact-specific. Please consult a licensed cross-border tax and estate planning professional before making decisions.
Top 5 FAQs
1. Does U.S. estate tax apply to my property in India?
If you’re a U.S. citizen or resident, yes-your worldwide assets, including Indian property, are part of your taxable estate.
2. What is the gift limit I can give tax-free in 2025?
You can gift $17,000 per person per year without using your lifetime exemption.
3. Can I deduct Indian inheritance or death taxes on my U.S. return?
Yes-Indian death taxes may be claimed as foreign death tax credit on your U.S. estate tax return, subject to limitations.
4. How do I value Indian real estate for U.S. estate tax?
Get an independent market appraisal and convert to USD using U.S. Treasury rates as of date of death/gift.
5. Do I need to file Form 706 for small U.S. estates?
Only if your combined U.S. and worldwide estate exceeds the unified tax exclusion (approx. $13.61 million in 2025) or your U.S. assets exceed filing thresholds.