Is Bringing Money from India to the US Taxable? IRS Rules Explained

Key Summary

Is bringing money from India to the USA taxable? Money transferred from India to the USA is not taxable based solely on the transfer. Tax implications depend on the source, gifts are tax-free, while income must be declared but can use foreign tax credits to avoid double taxation. What is the India US tax treaty benefit? The India-US tax treaty prevents double taxation by allowing US taxpayers to claim foreign tax credits for taxes paid in India, reducing or eliminating US tax on the same income. What is NRI remittance tax? India's TCS (Tax Collected at Source) applies when sending money from India under the Liberalized Remittance Scheme—0% up to ?10 lakh for most purposes, 5% above that for education/medical, and 20% for investments above ?10 lakh. Do I need a cross border tax accountant? Yes, if you're transferring significant amounts, have multiple income sources in both countries, or are unsure about reporting requirements. What forms do I file for money from India? Form 3520 for gifts over $100,000 from individuals, FBAR (FinCEN 114) if Indian accounts exceed $10,000, Form 8938 if assets exceed thresholds ($50,000-$600,000 depending on filing status), and report income on Form 1040.

Bringing money from India to the USA is generally not taxable if you can document the source. Gifts from Indian relatives under $100,000 per person per year are tax-free and don't require reporting. Above $100,000, you must file Form 3520 but still pay no tax. Income transfers (salary, rental income, business profits) are taxable but India-US tax treaty provisions prevent double taxation through foreign tax credits. Starting January 1, 2026, non-US citizens sending money from the US face a 1% remittance tax on cash remittances, but this doesn't apply to money brought into the US.

Moving money from India to the United States creates immediate questions about tax obligations. You received funds from family in India, sold property in Mumbai, or transferred savings accumulated over years. Now you're wondering whether the IRS will tax this money, what forms you need to file, and how to avoid penalties that can reach tens of thousands of dollars.

Without understanding how you can bring money from India to USA tax rules, you risk failing to report required information, losing foreign tax credits that eliminate double taxation, triggering IRS audits for unexplained deposits.

In this article you will learn when money from India is taxable in the US and when it's not, how the India US tax treaty prevents double taxation, what IRS forms you must file for transfers from India.

Is money transferred from India to the USA taxable?

Whether bringing money from India to the USA is taxable depends entirely on the source and nature of the funds, not the transfer itself.

Gifts from family: Tax-free

Money received as a gift from relatives in India is not subject to US income tax. The IRS does not tax recipients on gifts received, regardless of whether the donor is domestic or foreign.

However, you must report gifts exceeding $100,000 from any single foreign person (or related persons combined) on Form 3520. This is an information return only—no tax is due.

Income transfers: Taxable but with credits

Money that represents income is taxable in the US, but the India US tax treaty prevents double taxation. Income includes salary or business income earned in India, rental income from Indian properties, interest and dividend income from Indian investments, capital gains from sale of Indian assets, and pension income from Indian retirement accounts.

You must report this income on your US tax return. However, you can claim foreign tax credits for taxes already paid in India, typically eliminating or significantly reducing your US tax liability.

Inheritance: Generally tax-free

Inheritances received from Indian relatives are not subject to US income tax. However, any income generated by inherited assets (interest, dividends, rent) is taxable going forward.?

If the inheritance exceeds $100,000 from a foreign estate, you must file Form 3520 reporting the inheritance.

Repatriation of savings: Tax-free

Money accumulated in your Indian bank accounts before becoming a US tax resident can be transferred to the US without tax implications, provided you can document that taxes were already paid on the income when earned.?

Maintain records showing the source of funds and when income was earned and taxed.

Understanding the India US tax treaty

The India-US tax treaty plays a critical role in preventing double taxation when bringing money from India to the USA.

How the tax treaty works

The Double Taxation Avoidance Agreement (DTAA) between India and the United States ensures you don't pay full tax on the same income in both countries. The treaty accomplishes this through foreign tax credits, which reduce your US tax liability dollar-for-dollar by the amount of tax paid in India.

Example: You earn ?30 lakh (approximately $36,000) in rental income from property in Mumbai. You pay 30% tax in India (?9 lakh). When reporting this income on your US tax return, you claim a foreign tax credit for the ?9 lakh already paid, eliminating or substantially reducing your US tax obligation.

Treaty benefits by income type

Income Type	India Tax Rate	US Tax Rate	Treaty Benefit
Rental Income	30%	10-37% progressive	Foreign tax credit eliminates double tax
Interest Income	10-30% (varies)	10-37% progressive	Full credit for Indian tax paid
Dividend Income	20%	15-20% qualified	Credit prevents double taxation
Capital Gains (property)	20-30%	15-20% long-term	Credit for Indian tax reduces US liability
Business Income	Up to 30%	Up to 37%	Credit based on Indian tax paid

Important treaty limitation

The 1% remittance tax (effective January 1, 2026) does not appear to qualify as a covered tax under Article 2 of the India-US tax treaty. This means the treaty may not provide relief from the remittance tax, though this applies only to money sent from the US, not money brought into the US.?

What forms must you file for money from India?

Understanding IRS reporting requirements ensures compliance when bringing money from India to the USA.

Form 3520: Foreign gifts and inheritances

File Form 3520 if you receive gifts totaling more than $100,000 from any single foreign person (or related persons combined) during the tax year, or receive more than $20,116 (2025 amount, indexed for inflation) from foreign corporations or partnerships.

Filing deadline: File with your Form 1040 by April 15 (June 15 for expats with automatic extension).

Penalty for non-filing: 5% of the gift amount per month up to a maximum of 25%, or a minimum penalty of $10,000.?

FBAR (FinCEN Form 114): Foreign bank account report

File FBAR if the aggregate value of all your foreign financial accounts (including Indian accounts) exceeded $10,000 at any time during the calendar year.

This includes NRE accounts (Non-Resident External), NRO accounts (Non-Resident Ordinary), savings accounts, fixed deposits, investment accounts, and Demat accounts.

Filing deadline: April 15 with automatic extension to October 15. File electronically through FinCEN's BSA E-Filing System.

Penalty for non-filing: Up to $16,536 per report per year for non-willful violations, up to $165,353 and 50% of account balances for willful violations.?

Form 8938: Foreign asset reporting

File Form 8938 if your specified foreign financial assets exceed reporting thresholds. For individuals living in the US, the threshold is $50,000 on the last day of the year or $75,000 at any time. For expats living abroad, thresholds are higher: $200,000 on the last day or $300,000 at any time (single filers).?

Filing deadline: Attach to Form 1040 by April 15 (June 15 for expats).

Form 1116: Foreign tax credit

File Form 1116 to claim foreign tax credits for income taxes paid to India. This form calculates how much Indian tax can offset your US tax liability.?

Reporting requirements comparison

Form	Purpose	Threshold	Deadline	Penalty
Form 3520	Foreign gifts/inheritances	$100,000 from individuals	April 15	5% per month (max 25%)
FBAR	Foreign bank accounts	$10,000 aggregate	October 15 (with extension)	Up to $16,536 non-willful
Form 8938	Foreign assets	$50,000-$600,000 (varies)	April 15	$10,000 + continuing penalties
Form 1116	Foreign tax credit	Any foreign tax paid	April 15	No penalty (lose credit)

NRI remittance tax: India's TCS rules

When sending money from India to the USA, Indian tax rules apply at the source.

Tax Collected at Source (TCS) rates

India's Liberalized Remittance Scheme (LRS) allows individuals to remit up to USD 250,000 per financial year. TCS applies at the time of remittance based on purpose and amount.

TCS rates for common remittance purposes

Purpose	Up to ?10 Lakh	Above ?10 Lakh	Note
Education (via loan)	0%	0%	Must be from approved financial institution
Education (self-funded)	0%	2%	Reduced from 5% under Budget 2026
Medical treatment	0%	2%	Reduced from 5% under Budget 2026
Maintenance of relatives	0%	5%	No change
Gifts to NRI relatives	0%	5%	No change
Investments abroad	0%	20%	No change
Overseas tour packages	2%	2%	Flat 2% rate from first rupee (Budget 2026)

Note: India's Union Budget 2026 (effective April 1, 2026) reduced TCS rates to ease the burden on genuine remittances for education, medical treatment, and overseas travel. The key changes include:

Education (self-funded) and medical treatment remittances above ?10 lakh reduced from 5% to 2%
Overseas tour packages simplified to a flat 2% rate (previously 5% up to ?10 lakh and 20% above)
Investment-related remittances remain at 20% above ?10 lakh

These reductions mean lower upfront tax collection, though TCS remains claimable as credit when filing your Indian income tax return.

Form 15CB and Form A2

For remittances exceeding ?10 lakh, you need Form 15CB from a Chartered Accountant certifying that appropriate taxes have been paid. Submit Form A2 to your bank providing purpose code and recipient details.?

US remittance tax: New 2026 rules

Starting January 1, 2026, a new 1% remittance tax applies to certain money transfers from the United States.?

Who pays the remittance tax?

The tax applies to non-US citizens sending money abroad, including H-1B visa holders, L-1 visa holders, F-1 student visa holders, green card holders, and other foreign nationals residing in the US.

Important: This tax applies to money sent from the US to India, not money brought from India to the US.??

What transfers are taxed?

The 1% tax applies only to remittances made using cash, money orders, or cashier's checks. Transfers funded via US bank accounts (ACH transfers), US-issued debit or credit cards, and wire transfers are exempt.??

How to avoid the remittance tax

Use bank-to-bank transfers (ACH) instead of cash remittances. Fund transfers with debit or credit cards. Use digital payment platforms that transfer from US bank accounts. Avoid money orders and cashier's checks for international transfers.??

Example: Raj, on an H-1B visa, sends $5,000 monthly to his family in India. If he uses a money order, he pays $50 tax ($5,000 × 1%). If he uses a bank wire transfer, he pays zero remittance tax.

Do you need a cross border tax accountant?

Determining whether you need professional help depends on the complexity of your financial situation.

When you should hire a cross border tax accountant

You should engage a cross-border tax specialist if you have income from both India and the US, own property or businesses in India, received large gifts or inheritances from India, failed to file FBAR or Form 3520 in prior years, have unreported foreign accounts, are selling Indian property and transferring proceeds, or are planning to repatriate significant savings from India.

What cross border tax accountants do

Cross-border tax specialists analyze tax implications in both jurisdictions, calculate foreign tax credits to minimize double taxation, prepare required forms (3520, FBAR, 8938, 1116), develop strategies for tax-efficient money movement, represent you if the IRS questions foreign transactions, and help with delinquent filing compliance.?

How NSKT Global helps with India-US tax compliance

NSKT Global specializes in cross-border tax planning for individuals transferring money between India and the United States. Our experienced team understands both US IRS requirements and Indian tax regulations.

Our services include analysis of tax implications before transferring money from India, preparation of all required forms (3520, FBAR, 8938, 1116), foreign tax credit optimization using India-US tax treaty provisions, delinquent filing assistance for unreported foreign accounts, documentation support for large transfers, NRI tax planning for both inbound and outbound money movement, and representation if the IRS questions foreign transactions.

Whether you're bringing money from India to USA for the first time, wondering about the India US tax treaty benefits, need help with NRI remittance tax issues, or require a cross border tax accountant for complex compliance, NSKT Global provides the expertise to ensure full compliance in both countries while minimizing your tax burden.

IRS Red Flags for Money Transfers from India

Understanding what triggers IRS scrutiny helps you avoid audits when transferring money from India to the USA.

#1 Large unexplained deposits

Deposits of $10,000+ without corresponding income on your tax return trigger automatic scrutiny. Banks report these through Currency Transaction Reports (CTRs), which the IRS matches against your filings.

Protection: Maintain documentation showing source of funds (gift letters, property sale agreements, inheritance proof). File Form 3520 for gifts over $100,000.

#2 Structuring deposits to avoid reporting

Multiple deposits just under $10,000 (e.g., five $9,900 deposits instead of one $50,000 deposit) is called "structuring" and is a federal crime even if funds are legitimate.

Protection: Deposit large transfers as single transactions with proper documentation. Never split deposits to avoid thresholds.

#3 Unreported foreign accounts

Indian banks report US person accounts directly to the IRS under FATCA. The IRS matches this data against your FBAR and Form 8938 filings.

Protection: File FBAR if accounts exceed $10,000 aggregate. File Form 8938 if assets exceed thresholds. Include all Indian accounts (NRE, NRO, savings, FDs, Demat).

#4 Discrepancies between Forms 3520 and deposits

Form 3520 reporting $120,000 gift but bank showing $180,000 deposited creates immediate red flags.

Protection: Report total gifts accurately from all related foreign persons. Don't underreport amounts. Aggregate gifts from related family members correctly.

#5 Foreign income without proper reporting

Large transfers labeled "rental income" or "property sale" without corresponding Schedule E or capital gains reporting on Form 1040.

Protection: Report all Indian rental income on Schedule E. Report property sale gains on Schedule D. Claim foreign tax credits on Form 1116 for taxes paid in India.

#6 Missing Form 1116 despite foreign income

Reporting foreign income but not claiming foreign tax credits raises questions about Indian tax compliance.

Protection: Always file Form 1116 when claiming credits. Attach Indian tax payment proof (Form 26AS, IT returns).

#7 Inheritance without documentation

Substantial transfers claimed as inheritance but no Form 3520 filed and no supporting documents.

Protection: File Form 3520 for inheritances over $100,000. Attach death certificate, will, estate settlement documents, and proof funds came from deceased's estate.

#8 Inconsistent explanations across years

Explaining transfers as "gifts" one year, "savings" the next, and "business proceeds" the third year without documentation.

Protection: Maintain consistent, documented explanations. Keep a master spreadsheet tracking all transfers with dates, amounts, sources, and supporting documentation.