I am working in USA on an H1-B Visa.
I want to gift $10000 to my sister in India.
Her lawyer in India said I should also provide this in writing in some kind of bond paper. Where do I find a bond paper equivalent in the USA? Would an affidavit be enough?
Are there any tax implications on her or me?
In India, gifts received from close relatives are not taxable income to the recipient, and your sister qualifies as a close relative; unless she is a distantly related "cousin-sister". A daughter of your parents or a daughter of your parents' brothers and sisters qualifies as a close relative but once again, children of "cousin-brothers" and "cousin-sisters" of your parents are not close relatives. But, in case the Income Tax inspector in India has questions, you should send your sister a letter informing her of the gift,and she should you a reply letter accepting the gift. This can even be done in reverse order: your sister can request that you give her a gift, and you can comply with the request. As always, copies of all such correspondence should be kept in triplicate, and if your sister's lawyer wants things on "stamp paper" (I assume this what the "bond paper" you refer to is), ask the lawyer to create a request for a gift on the appropriate stamp paper and send it to you by paper mail or courier service, leaving enough space at the bottom of the page for you to write "Dear Sister, I am glad to give you the gift that you have requested." There is no US stamp paper.
There is no gift tax in the US for gifts under $14K (even gifts to made to strangers, let alone your cousin-sister). There is no letter specifically required in the US to make a gift, but a nice signed note, even on multipurpose copier paper, should be sent to your sister, and as discussed above, for purposes of satisfying the Indian Income Tax Authority, she may need to send you an acknowledgment and acceptance of the gift.
Finally, there is no US income tax implication with regard to the gift. In particular, you do not get to deduct the amount from your taxable income on Federal (or State) tax returns.
