US Estate Tax for NRIs and Non-Citizens: Rules for Indian Assets in 2026

This guide explains the US estate tax for non-citizens with assets in India as the rules stand in 2026: what counts, what is exempt, how a non-citizen spouse is treated, and how planning tools such as life insurance can help your family meet the bill.

What is the US Estate Tax?

If you are a non-US citizen who is domiciled in the US for estate tax purposes, the US generally considers your worldwide estate, including assets in India. For 2026, the federal basic exclusion amount is $15 million. India has no inheritance tax, and there is no US-India estate tax treaty.

US estate tax is a federal tax imposed on the taxable estate of a person who dies. The estate generally pays the tax before the remaining assets are distributed to the beneficiaries. The federal estate tax rate can reach 40%.

It is separate from income tax. The India-USA Double Taxation Avoidance Agreement (DTAA) helps you avoid paying income tax twice, but it does not cover estate tax at all.

Resident or Non-resident: Which One Are You?

For the US estate tax, being a "resident" does not mean the same thing as it does for income tax. Income tax looks at how many days you spend in the US. Estate tax looks at your domicile, meaning the place you treat as your permanent home with no plan to leave. Someone can be a US resident for income tax purposes and still be a non-resident for estate tax purposes.

In practice, a green card holder settled in the US is almost always treated as US-domiciled. An H-1B worker who plans to return to India may not be. The IRS looks at facts such as where you own a home, where your family lives and what you intend to do.

Are Your Assets in India Taxed by the US?

It depends on your domicile.

If you are domiciled in the US, your flat in India, your NRO and NRE deposits and any ancestral land are counted in your US estate at market value. Most families stay under the $15 million limit, but business-owning families and those with large property holdings in cities like Mumbai or Delhi can cross it.

If you are a non-resident, assets situated outside the US, such as Indian property and Indian bank accounts, are generally not subject to the US estate tax.

India itself repealed estate duty in 1985 and has had no inheritance tax since (Business Standard). There is also no estate tax treaty between India and the US, so NRIs cannot claim a higher limit the way residents of some treaty countries can.

Which US Assets Are Not Taxed for NRIs?

Not everything with a US connection is caught. For non-residents, the IRS treats some assets as located outside the US:

• Ordinary US bank deposits that are not used for a US business.

• Life insurance payouts for the life of a non-US citizen.

• Certain bonds and debt that pay tax-exempt "portfolio interest".

US shares, US real estate, and US retirement accounts are taxable.

What If Your Spouse Is Not a US Citizen?

When a US citizen passes away, everything left to their spouse can usually pass free of estate tax. This is known as the marital deduction. It does not apply, however, if the surviving spouse is not a US citizen, unless the assets are placed in a special trust called a QDOT (Qualified Domestic Trust).

There are two well-established ways to protect your spouse:

• Give gifts during your lifetime. In 2026, gifts of up to $194,000 per year to a spouse who is not a US citizen can generally qualify for the annual gift tax exclusion.

• Set up a Qualified Domestic Trust (QDOT). A QDOT allows the estate tax on assets passing to a non-US citizen spouse to be deferred. The tax may become due on certain distributions and at the surviving spouse's death. At least one trustee must be a US citizen or a US company, so your spouse cannot be the only trustee.

There is also a third route. If your spouse becomes a US citizen before the estate tax return is filed, and has lived in the US throughout the period after your death, the full marital deduction is available without a QDOT.

How Can NRIs Reduce US Estate Tax?

The right estate-planning strategy depends on where you are domiciled, the type of assets you own, and their total value. NRIs with US assets can consider the following steps:

• Plan for estate tax liquidity: The US federal estate tax is generally due within nine months of death. That is a short window, and families without ready cash are sometimes forced to sell property or investments in a hurry, often at the wrong time. Life insurance can fill this gap by giving your family funds to settle the tax bill on time. A term insurance plan for NRIs in the USA can provide a large cover at a relatively low premium, making it a practical way to build this liquidity. For nonresident noncitizens, there is an added advantage: life insurance proceeds on their own life are generally treated as property outside the US for estate tax purposes.

• Review how you hold US investments: The estate tax treatment can vary depending on how an investment is structured and where the underlying asset is situated. NRIs should review their US investments, including directly held US shares, with a tax professional to understand their potential estate tax exposure.

• Consider gifting during your lifetime: Passing on assets while you are alive can be a useful part of estate planning for some NRIs. The US gift tax rules for nonresident noncitizens, however, depend on the type of property and where it is located, so larger gifts of US assets need careful planning.

• Keep separate wills for each country: If you own assets in both India and the US, separate wills for each country can make life much easier for your heirs. Each court then deals with a will written for its own laws. The wills must be drafted with care so that one does not accidentally cancel or contradict the other.

• Keep Indian estate documents updated: Keep property titles, bank and demat account nominations, and other ownership records up to date. Depending on the location and type of asset, the will may also need to go through probate in India.

• Keep records of jointly owned assets: When one spouse is not a US citizen, the US estate tax treatment of jointly owned property can depend on who paid for it. Keeping clear records of each partner's contribution helps establish what the surviving spouse already owns, and can reduce the amount counted in the estate.

Which Forms May Your Family Need to File?

Form 706-NA is required once US assets cross $60,000, even if no tax ends up being due. Form 3520 is only a reporting form, but failing to file it can result in a penalty of up to 25% of the unreported amount.

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