From Rashmi’s Perspective
Rashmi traveled to the US to pursue her master’s degree, but she has already made her home there, founded a business, and plans to relocate to India shortly. Rashmi has traveled to Bangalore frequently over the past 20 years, and she is encouraged by the interesting and sincere work that many Indian non-profits are taking on.
She wants to donate a significant amount of her money to charity, but she’s not sure how she can do this without having to pay capital gains tax on the firm shares she intends to give to the organization. Rashmi’s contribution might not be banned under the FCRA because she is an Indian national working in the US with a green card (she is not a US person or US citizen). But in the US, she would also not be eligible for the charitable tax deduction.
Our best recommendation for Rashmi is that she establish a charitable organization with an Indian relative, but she would have to wait three years to receive an FCRA approval and be able to make contributions. Alternatively, she could purchase an organization in India that has already been in operation for three years, which is the requirement for FCRA approval. In either case, we would also suggest that Rashmi form another charity in the US to tie the two together in the future and appoint her reliable Indian family as trustees of the nonprofit.
From Rajan’s Perspective:
Like Rashmi, Rajan finds great inspiration in the non-profits and NGOs that are working so hard to improve senior citizen care, healthcare, and education. Along with his cofounders, Rajan wants to leave this Indian tech startup shortly.
Rajan wants to donate a significant amount to charity. Since Rajan is a US citizen, whether his contribution get a tax exemption from the US and India? Also whether his charity is fit to obtain FCRA approval.
Rajan, a US citizen who is preparing to leave an Indian company, should establish an Indian charity and then transfer a portion of his company stake to it. This should happen before a term sheet and valuation event happens, as the donation will not be tax deductible in the US. The goal is to guarantee that the profits from these shares are completely free from taxes in both India and the United States (the charity must also receive FCRA certification). In this manner, the charity will sell its shares at the time of the exit and will not be required to pay capital gains tax if it sells the shares within a year.
Contact Ventura Pranas, for such customised solutions to complicated tax-related issues.
