I am a US citizen wanting to transfer money to my Indian fiance to buy property. Is the best way to bring in cash, and declare the amount with customs at the airport? How much tax am I liable for (amount $30,000 USD). Or is it better to transfer from my US bank account to his Indian bank account? If it is a loan, am I still liable for the gift tax? Is my fiance liable for any taxes?
A. Kindly avoid taking dollars in form of cash to india unless and until it is an emergency. Once the dollar value is in excess of $10,000, you need to declare the same with Indian customs at the destination. Even though it is not a cumbersome procedure, why unnecessarily undergo all sort of documentation and most importantly at all security checks, you will be asked questions on dollars and you need to keep answering. Finally safety issue is always there during the journey.
B.There is no Tax on the amount you declare. You can bring in any amount. All you need is to declare the same.
C. It is always better to do a wire transfer.
D. Any transfer in excess of $14,000 from US, will atract gift tax as per IRS guidelines. You need to declare the same while filing your Income Tax in US and pay the gift tax accordingly.
E. Once your fiance receives the money , any amount in excess of Rs 50,000 would be treated as individual income and he has to show the same under Income from other sources while filing the taxes. Taxes will be as per the slab he falls under.
F.Only for blood relatives , this limit of 50,000 does not apply.
G. Reg the Loan option, suggest do not opt for the same. Incase you want to go ahead, then pl ensure that you fully comply with IRS rules on Loans made to a foreign person from a US citizen or resident. The person lending the money must report the interest payment as income on his or her yearly tax return provided the loan has interest element. No deduction is allowed if the proceeds are used for personal or non-business purposes.In the case of no-interest loans, most people believe there is no taxable income because no interest is paid. The IRS views this seriously and the tax rules are astonishingly complex when it comes to no-interest loans. Even though no interest is paid to the lender, the IRS will treat the transaction as if the borrower paid interest at the applicable federal rate to the lender and the lender subsequently gifted the interest back to the borrower.The lender is taxed on the imaginary interest income and, depending on the amount, may also be liable for gift tax on the imaginary payment made back to the borrower.
Hope the above claryfies your query. Since this involves taxation suggest you take an opinion from a Tax attorney and also ask your fiance to consult a Charted Accountant on the same.