Foreign Gifts and Inheritance from India: US Tax and Form 3520 Guide

When money or assets come to you from family in India — a cash gift from your parents, help with a US home down payment, or an inheritance of property, bank balances, gold, shares, or mutual funds — two questions get tangled together: "will I be taxed on this?" and "do I have to report it?" They are not the same question, and confusing them is where US-based Indians get into trouble. This overview walks through both sides — the US reporting (Form 3520, FBAR, FATCA, PFIC) and the Indian documentation and basis — and points you to the right deep dive.

Quick answer

Receipt of a genuine foreign gift or bequest is generally not US-taxable income to you. What can still apply is reporting — most importantly Form 3520 once you cross a threshold — plus FBAR/FATCA on any Indian accounts you now hold and PFIC rules if you inherit Indian mutual funds. Form 3520 is an information return filed separately from Form 1040; the risk is the penalty for not filing, not a tax on the gift. Special rules can apply to covered-expatriate gifts and to foreign-trust transactions.

Choose your situation

Jump to the guide that fits what you received:

• Cash from parents (including a US down payment) → Gift from parents in India to the USA
• A foreign inheritance / bequest → keep reading, then the Form 3520 checklist
• Indian property → Inherited Indian property & US tax
• Indian bank accounts / FDs → FBAR & FATCA for NRIs
• Gold or direct shares → see the asset-specific table below
• Indian mutual funds → Inherited Indian mutual funds & PFIC
• A foreign-trust distribution → this follows a different rule (see the source table) — get specialist review

Are you a US person?

Form 3520, FBAR, and FATCA are US-person obligations. If you are not a US person for tax purposes, receiving the gift or bequest generally does not create these US filings. US-person status is not decided by visa type alone — a green-card holder is generally a US person, an H-1B holder may be one under the substantial-presence test, and an F-1 nonresident alien may not yet be. Determine your US tax residency before applying any threshold. The cash-gift page has a status table to work through.

Donor / source-type decision table

The correct Form 3520 rule depends on who the source is. Keep these categories separate:

A foreign trust is not just another donor under the estate threshold — trust distributions to a US person follow their own Part III rules (and possibly Form 3520-A). Treat that as a specialist case.

US calendar year vs Indian financial year

The two systems measure time differently, which trips people up when a transfer straddles a year end.

A gift wired in January and another in the following April can fall in one US calendar year but two Indian financial years — so the US Form 3520 aggregate and each sender's India-side LRS/TCS math can cover different periods. Line them up carefully.

Form 3520 reporting matrix

Gift vs inheritance

Both are generally not taxable income to you on receipt. The differences show up in the paperwork and the cost basis:

• A gift is documented with a gift deed / declaration; an inheritance needs a will/probate or succession documents, a death certificate, and a legal-heir certificate.
• For a gifted asset, US basis is generally the donor's carryover basis; for an inherited asset, US basis is generally the date-of-death fair-market value. That single difference can change the tax on an eventual sale dramatically.

Asset-specific reporting table

Receiving each of these is generally not taxable income — but each carries its own reporting and future-income angle:

US basis vs Indian basis

Your eventual capital gain depends on cost basis, and the two countries compute it under their own rules:

Get a dated valuation near the gift or death date and keep the ownership chain now — reconstructing it after a sale is painful.

Documentation overview

Gather the relevant subset early; the Form 3520 checklist turns this into a step-by-step list.

• Gift: gift deed / declaration, source-of-funds records, sending and receiving bank records
• Inheritance: will / probate / succession documents, death certificate, legal-heir certificate
• Any asset: a valuation near the date received, and title/ownership records for non-cash assets

Decision map

• Cash from parents (or a down payment): Gift from parents in India to the USA
• Ready to file: Form 3520 checklist for gifts and inheritance from India
• Screen your own case: Form 3520 India gift and inheritance checker
• Inherited property: Inherited Indian property & US tax
• Inherited mutual funds: Inherited Indian mutual funds & PFIC

Frequently asked questions

Is a foreign gift or inheritance from India taxable income in the US?

Generally no — receiving a genuine gift or inheritance from a foreign person is not US-taxable income to you. Reporting can still apply: large foreign gifts or bequests can require Form 3520, a disclosure filed separately from Form 1040. Covered-expatriate gifts and foreign-trust transactions can follow special rules, so confirm your facts with a cross-border CPA.

How do I know which Form 3520 threshold applies to me?

It depends on the source. Gifts or bequests from a nonresident individual or a foreign estate use the $100,000 aggregate test; purported gifts from a foreign corporation or partnership use a separate, annually-indexed threshold ($20,573 for tax year 2026); and a foreign-trust distribution is reviewed under Part III rather than any gift threshold.

Does it matter whether I received the money in India or the US?

For the Form 3520 test itself, not much — that turns on the gift or bequest. But money or securities held in an Indian account become FBAR and Form 8938 review items once they are yours, and a later remittance to the US may require bank/FEMA documentation depending on the source and route. Money received directly into and retained in a US financial account does not create an FBAR filing requirement merely because the funds came from India. Form 3520 may still apply based on your US-person status, source category and annual aggregate. Note that directly held foreign real estate is generally not itself a foreign financial account for FBAR, though a foreign bank account holding rent or sale proceeds may count toward the thresholds, and Form 8938 treatment can be fact-specific.

What is different about inheriting Indian mutual funds?

Indian mutual funds are generally PFICs for US tax. Receiving them is not taxable, but holding and selling them can trigger Form 8621 and special default ("excess distribution") tax rules. This is the one inherited asset where getting US advice before acting can save the most — see the inherited mutual funds and PFIC guide.

Is Form 3520 filed with my tax return?

No. Form 3520 is an information return filed separately from Form 1040. For most calendar-year individuals it is generally due April 15 (June 15 if you live and work outside the US), and a valid income-tax-return extension generally extends it no later than October 15. Verify the current instructions and address before submitting.