Is it true that if an NRI/PIO/OCI inherits a property, like an apartment, in India from parents (who are living in India) then he/she will have to pay income tax even though the property is being used by family and not rented out? Also its not counted as the primary residence for the NRI/PIO/OCI as he/she has their main residence outside India. If one has to what are the procedures for paying income taxes in India. Any help would be appreciated.
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Property Inheritance Tax Question
- Thread starter Unimog
- Start date
sanjoseaug20
Registered Users (C)
I will try to answer based on local customs and not tax laws. If your family is using it, I presume you are not making any money from them, and should not have to report any taxes. Unless the property is a mansion and has huge rental in the market, you can also write it off as a gift to the family. IRS allows about 10-15K gift every year, no questions asked ... and this is for both husband and wife just in case the property is in joint name. Also, you can give this 10K gift to brother 1 (for example) and another 10K to brother 2. Up to 50-100 K property usage might be justifiable as such. There are no gift taxes for gifting to blood relative (brother, sister, parents) in India.
If you are getting rental, then you have to pay up.
Paying tax in India is not hard. Get a PAN #. Go online and pay. Nowadays some companies even help out with the paperwork. Your family might know. You would be able to take a tax credit for taxes paid in India against the US taxes (did I frame the statement right?) as long as you are reporting this income on both sides, which you should be.
However, all this is guesswork based on common sense and what I will do if my brother / sisters were going to use this property without paying rent. Do wait for others to chime in, or ask a tax advisor.
If you are getting rental, then you have to pay up.
Paying tax in India is not hard. Get a PAN #. Go online and pay. Nowadays some companies even help out with the paperwork. Your family might know. You would be able to take a tax credit for taxes paid in India against the US taxes (did I frame the statement right?) as long as you are reporting this income on both sides, which you should be.
However, all this is guesswork based on common sense and what I will do if my brother / sisters were going to use this property without paying rent. Do wait for others to chime in, or ask a tax advisor.
sanjoseaug20
Registered Users (C)
Thinking more, the issue of writing as gift makes it more complex. If you write gift, that means you earned something which you forgave. You will likely owe taxes on that. Notional gift of INR 1 is what will probably work. Steve Jobs was getting a salary of USD 1, why can't you let your family use your property for USD 1 !!
Thank you so much for the quick reply. I did not realize that one has to report to the IRS here in US if they have a property under their name in India. If the Indian property is not generating any income at all will the IRS tax me here in US?
A couple of weeks ago I saw an article on Times of India saying that if one inherits a property in India (around $100K in my case) and even if one does not rent it out and my parents use it occasionally then taxes need to paid on it in India since it is not the primary residence of the OCI. I believe even if its not rented out one has to pay some income tax on it in India. Is that true? In my case my parents are getting old and they want to transfer the property under my name. Parents live in that particular property occasionally and I reside here in US.
A couple of weeks ago I saw an article on Times of India saying that if one inherits a property in India (around $100K in my case) and even if one does not rent it out and my parents use it occasionally then taxes need to paid on it in India since it is not the primary residence of the OCI. I believe even if its not rented out one has to pay some income tax on it in India. Is that true? In my case my parents are getting old and they want to transfer the property under my name. Parents live in that particular property occasionally and I reside here in US.
I will try to answer based on local customs and not tax laws. If your family is using it, I presume you are not making any money from them, and should not have to report any taxes. Unless the property is a mansion and has huge rental in the market, you can also write it off as a gift to the family. IRS allows about 10-15K gift every year, no questions asked ... and this is for both husband and wife just in case the property is in joint name. Also, you can give this 10K gift to brother 1 (for example) and another 10K to brother 2. Up to 50-100 K property usage might be justifiable as such. There are no gift taxes for gifting to blood relative (brother, sister, parents) in India.
If you are getting rental, then you have to pay up.
Paying tax in India is not hard. Get a PAN #. Go online and pay. Nowadays some companies even help out with the paperwork. Your family might know. You would be able to take a tax credit for taxes paid in India against the US taxes (did I frame the statement right?) as long as you are reporting this income on both sides, which you should be.
However, all this is guesswork based on common sense and what I will do if my brother / sisters were going to use this property without paying rent. Do wait for others to chime in, or ask a tax advisor.
Last edited by a moderator:
sanjoseaug20
Registered Users (C)
Thank you so much for the quick reply. I did not realize that one has to report to the IRS here in US if they have a property under their name in India. If the Indian property is not generating any income at all will the IRS tax me here in US?
A couple of weeks ago I saw an article on Times of India saying that if one inherits a property in India (around $100K in my case) and even if one does not rent it out and my parents use it occasionally then taxes need to paid on it in India since it is not the primary residence of the OCI. I believe even if its not rented out one has to pay some income tax on it in India. Is that true? In my case my parents are getting old and they want to transfer the property under my name. Parents live in that particular property occasionally and I reside here in US.
In US, as far as I know, you do not have to declare the property, but you have to declare the income. However, I pretty much think this case is an outlier because there is no income.
Can you provide the times of india article link?
I am getting an error when attaching a link as it says I am allowed to post URLs to other sites only after I have made 15 or more posts. Google these exact words...NRI's guide to buying property in India. The Times of India article is dated July 22, 2011. Deepa Venkatraghvan is the author.
When you open the article look at the ques #4 which talks about tax on property in India. Ques #5 answers some of my previous ques where it says I have to report it in my US tax returns only if the India property is an investment which in my case is not as its inherited. But the article left me more confusing regarding income tax by Indian govt on inherited property in India.
When you open the article look at the ques #4 which talks about tax on property in India. Ques #5 answers some of my previous ques where it says I have to report it in my US tax returns only if the India property is an investment which in my case is not as its inherited. But the article left me more confusing regarding income tax by Indian govt on inherited property in India.
In US, as far as I know, you do not have to declare the property, but you have to declare the income. However, I pretty much think this case is an outlier because there is no income.
Can you provide the times of india article link?
sanjoseaug20
Registered Users (C)
Found the article. Not sure if I can offer any help/ideas. Check out r2iclubforums.com ... those guys might know more as they specialize in Indo - US / expat / repatriation stuff. Not sure if I am supposed to provide links to other sites, but apart from ginnu (another member) you may not find too many people expert in this field so I am not doing any harm to this forum.
Thanks for your replies. You've been a great help. Once I come to know for sure I will let you know what the rules are.
Found the article. Not sure if I can offer any help/ideas. Check out r2iclubforums.com ... those guys might know more as they specialize in Indo - US / expat / repatriation stuff. Not sure if I am supposed to provide links to other sites, but apart from ginnu (another member) you may not find too many people expert in this field so I am not doing any harm to this forum.
-------Thank you so much for the quick reply.
I did not realize that one has to report to the IRS here in US if they have a property under their name in India. If the Indian property is not generating any income at all will the IRS tax me here in US?
---------------No reporting is needed and no Tax to be paid to US
A couple of weeks ago I saw an article on Times of India saying that if one inherits a property in India (around $100K in my case) and even if one does not rent it out and my parents use it occasionally then taxes need to paid on it in India since it is not the primary residence of the OCI. I believe even if its not rented out one has to pay some income tax on it in India. Is that true?
------- Times of India articles are not written by those who deal India tax/US Tax. I have read many article that gave wrong info. some journalist goes to CA ask few questions then they print it as nobody checks that
In my case my parents are getting old and they want to transfer the property under my name.
-------Not a Problem. That is going to be Inherited property from your Parents. You don't have to pay any tax to US but will pay Property tax to Municipality when they send the notice for the tax. if the property in Village then no property tax[/B]
Parents live in that particular property occasionally and I reside here in US.