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I am an Indian working in the US on H1B and I want to transfer some money (about $70k) to my parents in India. They plan to use it temporarily and then return the money back to me in the US.

What will the tax implications for this be in both India and the US? Do I need to officially declare this amount to be a gift sent to India and a gift received from India?

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On the US side,

You can send up to $ 15,000 (2018 and 2019 max) per year per person you are gifting before you pay the gift tax. Since you are sending to your parents you can send $30,000 USD without a gift tax.

After $30,000 you'll pay gift tax which goes from 18-40%; see rate for 2018 here. In order to avoid this you can 'loan' your parents the money. In order to legally loan the money out you must charge them the applicable federal [interest] rate (AFR). This is quite low i.e. the current AFR for short-term (<= 3 years) in Feb 2019 is 2.57%. Rates can be found here. You need to write and sign a loan agreement to have the loan properly documented in order to prove the transaction was a loan and not a gift. If you want to avoid making your parents pay interest then the following calendar year gift them the amount the interest cost them.

On the India side,

Under the Liberalised Remittance Scheme (LRS) your parents should be covered to send the money back (up to $250,000 USD) during the financial year (April – March). Read more here.

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