TCS on Gifts to Your Child in the USA (2026 Rules)

Quick answer (updated October 2026): TCS on a gift to your son in the USA (or daughter) is collected by the Indian bank under LRS: nil on the first ₹10 lakh a parent remits in a financial year, and 20% above that (confirm the current rate with a CA). TCS is not a final tax. Your parent can claim it as a credit or refund in their Indian return.

Your parents in Pune want to help with the house in Edison. They walk into the bank to send ₹50 lakh and learn that ₹8 lakh will be "deducted." Panic follows, often a family WhatsApp argument, and sometimes a rushed decision to route money through a cousin.

None of that is necessary. TCS is a prepayment, not a penalty, and with some calendar planning it can be reduced or avoided entirely. This guide covers how TCS on LRS gifts works in 2026, worked examples in rupees, how to split across parents and financial years, and how it fits with your US mortgage file.

How TCS on LRS gifts works in 2026

Under the Liberalised Remittance Scheme, a resident individual in India can send up to USD 250,000 per financial year (April to March) abroad, and gifts count toward that limit. Each parent has their own LRS limit.

When the purpose is a gift or investment ("other purposes"), the remitting bank collects Tax Collected at Source (TCS):

• Nil on the first ₹10 lakh remitted by that person in the financial year

• 20% on the amount above ₹10 lakh (threshold in effect since April 1, 2025; confirm the rate with a CA, as of October 2026)

Education and medical remittances have a lower rate above ₹10 lakh (2% under Budget 2026), but a down payment gift isn't one of those.

The ₹10 lakh threshold applies per person, per financial year. Other LRS remittances by the same parent in that year generally count toward it, so if your father already sent money abroad in that FY, his remaining TCS-free room is smaller. Your parents' CA should confirm the math.

TCS examples in rupees: one parent vs. two, one FY vs. two

Here's what TCS looks like on common gift sizes, assuming no other LRS remittances in the year. (Illustration only; your CA should confirm.)

Gift plan	Remitted per parent per FY	TCS per remittance-year	Total TCS collected
₹40 lakh, father alone, one FY	₹40 lakh	20% × ₹30 lakh = ₹6 lakh	₹6,00,000
₹40 lakh, father + mother, same FY	₹20 lakh each	20% × ₹10 lakh = ₹2 lakh each	₹4,00,000
₹40 lakh, both parents, split across two FYs (March + April)	₹10 lakh each, each FY	Nil	₹0
₹60 lakh, father alone, one FY	₹60 lakh	20% × ₹50 lakh = ₹10 lakh	₹10,00,000
₹60 lakh, both parents, split across two FYs	₹15 lakh each, each FY	20% × ₹5 lakh = ₹1 lakh each	₹4,00,000

The March-and-April trick is the most useful planning tool. A remittance on, say, March 20 falls in one Indian financial year; a second on April 3 falls in the next. That gives each parent two ₹10 lakh thresholds within about two weeks. Before relying on the two-parent rows, ask your parents' CA whether each parent should be remitting funds held in their own name.

Getting TCS back: credit, not a cost

TCS shows up in the remitter's tax records (Form 26AS / annual information statement). Your parent then:

• Claims it as a credit against their Indian income tax for that year, or

• Gets a refund after filing their return, if TCS exceeds their tax liability

For a retired parent with modest taxable income, most of that ₹6 lakh may come back as a refund. The real cost is cash flow: the money is tied up until the return is processed, which can take months. If your down payment math depends on every rupee, plan for the full amount to be sent with TCS on top, or use the split strategy so there's less to wait for.

Talk to a loan officer who's seen this before: We'll line up your parents' remittance dates with your closing date so you're not choosing between paying TCS and missing closing. Book a free call.

Parents sending money for a house in the USA: the mortgage side

Once the money leaves India, a different rulebook applies. Fannie Mae's gift rules (B3-4.3-04) are friendly to families abroad:

• The donor doesn't need to be a US person, and funds don't need to start in a US account

• Parents are acceptable donors; there's no minimum borrower contribution on a one-unit primary residence

• You'll need a signed gift letter, evidence the money came from the donor's account, and proof of transfer

• Under the foreign asset rule, funds must be in dollars in a US or state-regulated institution and verified before closing

Splitting across parents and financial years means more wires, and each one is a deposit your lender will want sourced. That's fine: one gift letter per donor and each parent's bank statement handles it. Deciding where those wires should land? See wiring money from India to escrow vs. your own account. Read the full process in gift money from India for a down payment. If your parents want it repaid someday, it isn't a gift; see gift vs. loan from parents.

Timeline example

Say Ananya, a green card holder in Charlotte, needs ₹40 lakh from her parents in Hyderabad and plans to close in mid-May. (Illustration only.)

Date	Action
Early March	Parents meet their CA; confirm no other LRS remittances this FY
March 18	Father remits ₹10 lakh; mother remits ₹10 lakh (nil TCS)
April 2	Father remits ₹10 lakh; mother remits ₹10 lakh (new FY, nil TCS)
April	Ananya's lender collects gift letters and both parents' statements
Mid-May	Closing; funds already verified in dollars

Four wires, zero TCS, and every deposit sourced well before closing. Moving money early also helps with seasoning funds from India.

The US tax side: Form 3520

A gift from your parents isn't income to you in the US, but large foreign gifts are reported. If you receive gifts from a nonresident alien individual totaling more than $100,000 in a tax year, you file Form 3520, an information return, not a tax. Penalties for missing it are steep: 5% of the gift per month, up to 25%.

One catch: India's financial year (April–March) isn't the US tax year (January–December). The March/April split that saves TCS keeps both gifts in the same US calendar year. Our Form 3520 guide explains how gifts are counted. Talk to a US CPA.

India tax on the gift itself

Separate from TCS, India taxes some gifts received. Gifts from "relatives" (which include lineal ascendants like parents) are exempt for the recipient. Since July 5, 2019, money paid by a resident to a non-resident is deemed to arise in India, but gifts from relatives remain exempt. A gift from a family friend may be treated differently; ask a CA.

What the rules actually say

• RBI Liberalised Remittance Scheme: USD 250,000 per resident individual per financial year, gifts included; each parent has their own limit, as of October 2026.

• India TCS on LRS "other purposes": nil up to ₹10 lakh per financial year, 20% above (threshold effective April 1, 2025; confirm rate with a CA). TCS is creditable/refundable against the remitter's Indian tax.

• Fannie Mae Selling Guide B3-4.3-04 (02/04/2026): donors need not be US persons; gift funds need not originate in a US account; no minimum borrower contribution on a one-unit primary residence.

• IRS Form 3520: required for gifts from a nonresident alien individual totaling more than $100,000 in a tax year; penalty 5% per month, up to 25%.

Frequently Asked Questions

Q: Is TCS charged when parents send money to their son in the USA?
A: Yes, if the gift exceeds the threshold. Under LRS, TCS is nil on the first ₹10 lakh a parent remits in a financial year and 20% on the excess (confirm with a CA). Each parent has their own threshold.

Q: Can my parents get the TCS refunded?
A: Yes. TCS is a credit against the remitter's Indian income tax. If it exceeds what they owe, they can claim a refund when filing their Indian return. The cost is the time the money is tied up, not the TCS itself.

Q: Can both parents send ₹10 lakh each to avoid TCS?
A: Each parent has a separate ₹10 lakh threshold per financial year, so two parents can remit ₹10 lakh each with nil TCS, assuming no other LRS remittances that year. Ask your CA whether each parent should be sending funds held in their own name.

Q: Does splitting a gift across financial years cause problems with my mortgage?
A: No, as long as each wire is documented. Your lender will want a gift letter from each donor, each donor's bank statement, and proof of each transfer. Start early so all funds are verified in dollars before closing.

Q: Do I pay US tax on a gift from my parents in India?
A: Generally no; gifts aren't taxable income to the recipient in the US. But if gifts from nonresident alien individuals total more than $100,000 in a tax year, you must file Form 3520. Confirm with a US CPA.

Get your money-from-India sourcing plan, TCS math included

Tell us how much your parents plan to give, from which accounts, and your target closing month. We'll send back a money-from-India sourcing plan with remittance dates mapped to Indian financial years, the gift letters and statements your lender will want, and a buffer before closing. We shop 150+ wholesale lenders and work with families sending money from India every week. Book a free 15-minute call at /contact, start your application at /apply, or call 713-366-4668.

Masala Loans is a brand of Matador Lending, LLC (NMLS #2072896). Written by Apurva Sanghavi, President, NMLS #227127. Equal Housing Opportunity. This article is general education, not tax, legal or immigration advice — consult a qualified CPA, attorney or immigration lawyer for your situation. Program availability, rates and terms vary by lender and borrower and are subject to change; not a commitment to lend.