Taxes on money transferred to India

[akhichopra]

Hello Folks,
I am on H1-B since Aug2009 and last year-2010, I transferred around 40K USD to parents. All these transfers were spread over the year in the denominations of 5K per transaction.(As and when I saved money).
My question is, do I have to pay taxes in US on this money transferred to India. I know that my parents don't have to but I am not sure about myself.

Any pointers in this regard will be highly appreciated. Thanks,

[hibworker]

Since this is part of your income you will have to pay taxes on it. Your employer would have already deducted some or all of the taxes due via withholding.

[akhichopra]

Thanks for your kind reply. Yes this income of 40K is after my employer deducts taxes via withholding everymonth from my salary.
I am confused because I read that you have to declare any foreign accounts held. In my case I dont have any NRI account, I transferred the money to my parents account in India.
I am not sure if I fall in the category where I have to declare all this. Thanks again for your help.

[akhichopra]

Thanks for your kind reply. Yes this amount of 40K is what i saved from my salary after my employer deducts taxes via withholding. I am confused because I read that you have to declare any foriegn accounts help while filling for taxes here in US. I made these trasnfers to my dad's account and I dont have any NRI account. I am not sure if I will fall into this category and have to declare all this. Thanks again for your help.

[smuggymba]

Originally Posted by akhichopra

Hello Folks,
I am on H1-B since Aug2009 and last year-2010, I transferred around 40K USD to parents. All these transfers were spread over the year in the denominations of 5K per transaction.(As and when I saved money).
My question is, do I have to pay taxes in US on this money transferred to India. I know that my parents don't have to but I am not sure about myself.

Any pointers in this regard will be highly appreciated. Thanks,

Good job with savings

No, you have already paid tax on it. I've been here since 2004 and have sent 12.5K USD to India and never paid tax.

[indigo10]

Originally Posted by akhichopra

Thanks for your kind reply. Yes this amount of 40K is what i saved from my salary after my employer deducts taxes via withholding. I am confused because I read that you have to declare any foriegn accounts help while filling for taxes here in US. I made these trasnfers to my dad's account and I dont have any NRI account. I am not sure if I will fall into this category and have to declare all this. Thanks again for your help.

You dont fall in to that category and as several members mentioned you dont have to pay taxes for remittances as you already paid tax while earning it.

[Dhundhun]

When money is in excess of $10,000, there are several applicable rules.

~ It must be reported to treasury, it transfer in a year is more than $10,000.
~ It must be reported to treasury, at any time foreign bank account had money in excess of $10,000.

And of course:
~ Interest in foreign banks and earning in foreign stocks must be reported as income on US returns (any world-wide income).

There are many violations, and perhaps IRS is unable to chase defaulters. People enjoy defaulting and not reporting.

[pbuckeye]

I doubt that there is any "transfer tax". As long as you have filed your income tax return that showed the source of that "saving" (good job there), you have already paid taxes on it. Also, your parent don't have to pay any tax on it since there can be no double taxation of the said money.

[mnkaushik]

You dont have to pay any taxes for tranfering money. It looks like you are supporting your parents by transfering your savings to their account.

Since the account is in your parents name and i am guessing you are not a jt holder since that is illegal in india. A NRI and indian resident cannot be joint holders of an account.

If you were transferring it to your nre or nro account in India then you are supposed to report the account information using FBIR form( if sum of amount in all acounts > $10K) and pay taxes in US on the interest earned in those accounts.

I was not doing it initially but for past 5 years i have been paying taxes and past three years reporting all my accounts to IRS.

Hope this helps.

[sanju_dba]

do you have rights to operate your parents account - if yes, then you need to report . further, you would report only if and only if that account had > 10k USD at any given day.

[akhichopra]

My sincere thanks to all for giving valuable insights and suggestions. Thank you everybody for your time and help.

[win_or_win]

Hi Guys,

I need your help on this. My cousin is running this small IT company in india and he mentioned that when US client sends their money to India via Pay Pal or some secure money transfer , they are charging them 4 % of transfer amount.

He ask me that what could be the best way to avoid this fees , some of the option that we thought about,

1) If they (cousin's company) open an bank account in USA and utilize this to transfer the money to indian bank account - Would they still need to pay US tax as money is being deposited into the US account?

2) If I utlize my bank account - I think in this scenarion I have to pay the US tax for whatever money the client is depositing into my account in order to make this legal transfer

3)If US client utilize remit2india, ICICI to transfer money which I highly doubt

I appriciate your responce on this.

[bugsbunny]

Originally Posted by akhichopra

I am confused because I read that you have to declare any foreign accounts held.

This applies to US Citizens ...it may apply to you if you already have your green card...but i am not fully sure about this....and i am quite sure it does not apply if you are on a work visa

[roseball]

Originally Posted by win_or_win

Hi Guys,

I need your help on this. My cousin is running this small IT company in india and he mentioned that when US client sends their money to India via Pay Pal or some secure money transfer , they are charging them 4 % of transfer amount.

He ask me that what could be the best way to avoid this fees , some of the option that we thought about,

1) If they (cousin's company) open an bank account in USA and utilize this to transfer the money to indian bank account - Would they still need to pay US tax as money is being deposited into the US account?

2) If I utlize my bank account - I think in this scenarion I have to pay the US tax for whatever money the client is depositing into my account in order to make this legal transfer

3)If US client utilize remit2india, ICICI to transfer money which I highly doubt

I appriciate your responce on this.

If you are working on H1, #2 is not an option. You will be violating immigration laws by accepting payment from unauthorized sources by doing so.

[snathan]

Originally Posted by win_or_win

Hi Guys,

I need your help on this. My cousin is running this small IT company in india and he mentioned that when US client sends their money to India via Pay Pal or some secure money transfer , they are charging them 4 % of transfer amount.

He ask me that what could be the best way to avoid this fees , some of the option that we thought about,

1) If they (cousin's company) open an bank account in USA and utilize this to transfer the money to indian bank account - Would they still need to pay US tax as money is being deposited into the US account?

2) If I utlize my bank account - I think in this scenarion I have to pay the US tax for whatever money the client is depositing into my account in order to make this legal transfer

3)If US client utilize remit2india, ICICI to transfer money which I highly doubt

I appriciate your responce on this.

#1 - he would not be able open the account here without SSN/EIN and need to pay the tax here if register his company here. Corporate tax rate is 35-39%

he is better off with 4%