US estate tax on Indian assets, what NRIs often miss.

• US estate tax (IRC Section 2001-2210): taxes worldwide gross estate of US citizen / US domiciliary at death at graduated rates up to 40%.
• US citizens: worldwide assets taxed. No geographic limit.
• US green card holders (LPR, domiciliaries): worldwide assets taxed if domiciled in US. Domicile = physical presence + intent to remain permanently.
• Non-US-domiciled aliens (NRIs without green card): only US-situs assets taxed (US real estate, US company shares, US tangibles in US).
• Lifetime exemption 2026: USD 13.99 million per person (indexed). TCJA provision — sunsets end of 2025 to ~USD 7 million (2026 inflation-adjusted ~USD 7-7.5M) unless Congress extends. Significant uncertainty.
• Rate: 40% on amounts above exemption.
• Form 706: US Estate Tax Return. Filed within 9 months of death (6-month extension possible).

• Indian real estate: residential + commercial property. Valued at fair market value on date of death.
• Indian company shares: listed + unlisted. Listed at NSE/BSE closing price; unlisted at FMV (DCF or NAV).
• Indian mutual fund + ETF holdings.
• Indian bank balances: NRE, NRO, FCNR — all at date-of-death balance (converted at date-of-death FX rate).
• Indian partnership + LLP interests.
• Indian provident fund + superannuation balances (complex — depends on fund type).
• Indian insurance policy proceeds payable to estate (not payable to named beneficiary — those bypass estate).
• Indian jewellery / valuables: Indian location + Indian valuation.

All added to US estate at FX-converted fair market value as of date of death.

• India abolished estate duty in 1985 — no Indian estate tax.
• US estate tax does apply to US citizens / domiciliaries on worldwide assets including Indian.
• No India-US estate tax treaty means no formal mechanism to avoid double tax (though double tax is unlikely because India has no estate tax).
• Transfer stamp duty in India: when Indian property transfers to heirs post-death, stamp duty + registration applicable in India (varies by state, typically 2-7% of circle rate). Not a 'tax' per se but a real cost.
• Capital gain at future sale: Indian heirs who later sell inherited property pay Indian capital gain tax on sale. Cost of acquisition for them = cost in NRI's hands + indexation (not FMV at death). Important: no Indian step-up at death (unlike US).

• Annual gift exclusion: USD 19,000 per donee per year (2026). Gift Indian assets gradually to US-citizen spouse or US-citizen children. Reduces estate while using annual exclusion.
• Spousal unlimited marital deduction: unlimited for US-citizen spouse. Transfer all Indian assets to US-citizen spouse via Will — no estate tax on first death. Second-to-die planning needed.
• QDOT (Qualified Domestic Trust): for non-US-citizen spouse, standard marital deduction not available. QDOT structure (US trust with US trustee) qualifies for marital deduction. Specific IRC Section 2056A rules.
• Credit shelter trust: at first death, apply USD 13.99M exemption to a trust that grows outside survivor's estate. Standard US estate planning.
• Lifetime gifts of Indian assets: value appreciation after gift stays with donee — reduces estate growth. Caution: gift tax applies to gifts above annual exclusion; uses lifetime unified exemption.
• Life insurance for liquidity: Irrevocable Life Insurance Trust (ILIT) holds policy — proceeds outside estate.
• Charitable giving: unlimited charitable deduction. Charitable Remainder Trust (CRT) can defer / reduce tax.
• Pre-mortem planning for Indian property: joint ownership with US-citizen spouse / children can shift fractional interests out of estate. Must comply with Indian stamp duty + mutation.
• Non-resident alien route: if green card holder willing to expatriate (Section 877A exit tax applies), post-expatriation only US-situs assets in US estate. Indian assets outside US estate.

• Current USD 13.99M exemption (2026) is temporary — set by TCJA 2017 to double the pre-2017 exemption. Scheduled to sunset end of 2025 (2026 fiscal year start) to roughly half (~USD 7M in 2026 inflation-adjusted terms).
• Congress may extend / modify in 2025-2026 tax legislation. Significant political uncertainty.
• Planning action: NRI with large estate (above ~USD 7M including Indian assets) should consider using current USD 13.99M exemption via lifetime gifting + trust structuring BEFORE potential sunset.
• Clawback rule: IRS has stated that gifts using 2017-2025 doubled exemption will NOT be clawed back after 2025 sunset. 'Use it or lose it' planning advantageous.

Last updated: 2026-10-15.