FAQ

DISCLAIMER

The following are for specific cases only and is not applicable for general situations. For any specific cases, you may want to take appropriate advice.

I am considering selling my house in India where I lived till 2016. I bought that house in 2010. Can you help me understand long term capital gain tax implication in US for such sale - both from federal and state tax law standpoint. Do we also have indexation in US to adjust cost of the house?

You may not be liable for any capital gain tax if the property is sold by Dec 2019 since the house can be considered as the primary residence (lived for a period of 2 years in last 5 years from the date of sale). Further you may be eligible for partial exemption if the property is sold after Dec 2019 since your move is work related. Considering the capital gain amount you may still be out of capital gain tax if the property is sold after Dec 2019 but before Dec 2021.

Received gift from relatives in India through PayPal and Bank wire transfer – Tax Implication

No problem in receiving gift from relatives in India assuming that they are non residents in USA (Not US Citizen, GC holders or resident aliens). You can freely receive up to $14,000 of gift. There is no tax implication in US. There is no tax implication even if you receive more than that. However a gift tax return need to be filed depending up on situation. Further you have to be careful on Indian tax impact and also for larger amount you need to check FEMA regulation in India.

My father wants to transfer money to my account from abroad – Tax Implication

No tax in US. But you may check about FEMA rule / Foreign Exchange rule in India / your own country. There is no limit for transferring from a Non resident to a resident however there is a limit for

the reverse transfer. There is no restriction or limit in using money for any purchase or expenditure.

My parents are planning to gift cash ~$50K to me. Do you know what the method for this transaction is? Also what is the tax implication?

$50K is below the threshold and hence you can receive as gift without any additional compliance. However you may have to file a gift tax return.

Is gift deductible on my income tax return?

NO. Making a gift or leaving your estate to your heirs does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than gifts that are deductible charitable contributions)..

I have 3 children. How much gift can I give without attracting gift tax?

You can gift up to $14,000 (for year 2017) to each of the three children without attracting gift tax. Total you can gift $42,000. However your gift to each child should not exceed $14,000.

I have an update that my state tax refund is sent to my mailing address. However I had not received the check. What to do.

You may call up the state revenue department and they will issue you a duplicate check free of charges.

Can I apply for a ITIN for my spouse without an accompanied Tax Return.

Usually ITIN is applied with a Tax Return to claim the joint benefit. However there are other cases you can apply for ITIN. One of the case is to open a bank account.If it is to open a bank account for spouse, a letter is needed from the bank stating so.

My father (Resident in India) wants to transfer some money from India to my account in USA as a gift, I have following questions:

1. Will the money transfer be subject to any tax.

No tax in US. But you may check about FEMA rule in India.

2. Is there a limit to the sum of money that can be gifted without being taxed.

There is no limit for transferring from a Non resident to a resident however there is a limit for the reverse.

3. Are there any restrictions to use the sum of money towards any expenses or purchases

No restriction as long as it is not used for any illegal purpose.

I have a joint account in India with different banks. Under FBAR are these called financial authority or Signature Authority.

Financial Authority

I have paid a Nanny in cash to take care of my child. But I don't have her SSN details. Can I claim such payment to her in my USA tax return.

No. As per IRS, SSN of the payee is needed to claim the expenses in US tax return.

I am joint account holders in a bank in India with my mother. My mother report income and pay taxes in India. Do I report the same in my us tax return.

If you are a resident alien, you are liable for tax on your global income. Hence interest income in India is taxable in your us tax return. Of course you will get credit in US return for taxes paid in India.

What is the due date of filing FBAR

April 15th of the year following the calendar year for which the report needs to be filed.

Does Non Resident Aliens entitled to efiling

Yes. Non resident returns (1040-NR) can be efiled. Earlier IRS was not allowing efiling of Non resident aliens return. Those returns were required to be paper filed. However IRS have started allowing efiilng of non resident returns.

Does students under F1 or research scholars under J1 Visa required to pay FICA (Social Security and Medicare) taxes

No, student under F1 visa are not required to pay FICA taxes up to 5 years. Similarly research scholars under J1 visa are not required to pay such taxes up to 2 years. Any taxes withheld by employer by mistake can be returned back to the students/scholars. However in case the employer is unable to return the taxes the same can be claimed from irs.

Does students under F1 visa entitled to tuition fee deduction.

No. as they can not be issued 1098T by the college/institution which is a prerequisite to claim such deduction in 1040.

living in WI and working in Houston..would I file W4 for WI

Yes, You need to file a fresh W4 for state of WI. Since you are residing in WI that is your home state and a tax is due to the state no matter where you work. While tax is also due to the state where you work, in the current scenario you don't have to as TX has no tax.

I am on H1 visa lived in NY city for 6 months. Am I liable for NY city tax

You may not required to pay city tax as you are a non resident for NY City. NY City considers it residency status same as NY State resident. You are not a NY state resident because:

A) Neither you are a domicile of NY

B) Nor you have maintained a permanent place of abode in NY state for more than 11 months of the year and spend 184 days or more in NY State during tax year.

Domicile:

1. domicile is the place you intend to have your permanent home..which is in effect India

2. Domicile is in effect where your permanent home is located..which is India

3. Domicile is the place you intend to return to after you are away on a business assignment..which is again india

Are there any children's future investment fund or a similar investment vehicles in India.

There are many ways money can be saved for the future benefit of children. Few of them are as below

1. Equity Mutual Fund

2. Public Provident Fund (PPF)

3. National Savings Certificate (NSC)

Return in an average are between 8.5% to 10.5% and the income grows tax free. While PPF and NSC have very little or no risk, Equity mutual fund has a market risk. But since the funds are managed by professionals, ignoring short term fluctuations such funds give around 10% return over long term.

There are few other options such as

1. Debt Mutual Fund

2. Recurring Deposit / Fixed Deposit with Banks.

Return here varies between 7.5% to 9%. These funds offer more flexibility such as you can withdraw at any time. Income is taxable. Here the risk is very little or nill.

Note:While investing in PPF,NSC,Bank is easy , the investor need to carefully decide about investing in a mutual fund. There are many factors needs to be looked at while taking a decision such as load factor, past track result, funds objective and its investment plan, fund manager and his track record, etc.

I want to give INR 50 lakh / USD 50K from my Indian bank account (nro) to my brother in law who resides in a foreign country ( also has Indian bank account) for an year. what are the gift tax implications?

Yes, you can loan your brother in law INR 50L / USD 50K for a year. Pls note that The loan must be legal and enforceable. Also it is advisable to charge a nominal irs approved interest rate of minimum 2.38% (applicable for July 2018 gonly). You may collect interest semiannually or at the end of the year. Otherwise, it may be deemed a gift.