Hello,

Me and my wife are both Non resident Indians living in the US and file taxes here. we do not have any income in india other than very nominal interest income on money in Indian bank deposits which is below Indian tax limits. My wife gifted 5 lakh rupees of money, approx $10000 in 2008 to me which i used to pay off a loan for property purchased in india. She had received the 5 lakhs as gift from her parents. Please advise how would it affect from the Indian and US taxation angle. The money transactions were all done from our accounts in india. we have alrealy filed FBAR's.

Thanks

AtlantaTaxExpert

If you are non-resident aliens (which is dictated by the type of visa you have while in the U.S., a fact you neglected to include in your posting), then the transactions in India have NO BEARING on your non-resident alien tax return (Form 1040NR or 1040NR-EZ).

On the other hand, if you are in fact resident aliens who must file Form 1040, then you must report the interest earned in the Indian banks on Schedule B which is filed with the Form 1040.

The transfer/gift of assets between spouses need not be reported to the IRS, as the IRS considers such assets to be jointly owned. Hence, the transfer between the spouses do NOT qualify as gifts for the purpose of the gift tax.

As for gift from your wife's parents to her, that too need not be reported if her parents are not U.S. citizens or permanent residents.

MukatA

You are "Non resident Indians." This does not tell us if you have completed substantial presence test (residency test) in the U.S. or not.
If you file resident in the U.S., then you should be aware of Form FBAR filing requirements.

rams4680

sorry that i was not clear, i'm a US resident on H1B visa.

MukatA

Abouts gifts:
1. A resident can give any amount of gift to the resident spouse.
2. The receiver of the gift does not pay any tax.
3. Any resident can give a gift to up to $13,000 to any number of individuals in a year.
4. If the donor of gift is a non-resident alien, then the donor is not subject to U.S. taxes.