New Delhi, March 4 -- To assess US tax exposure, it is important to first distinguish between two related but distinct aspects of US tax law: Income tax and transfer taxes, the latter covering gift tax, estate tax, and generation-skipping transfer (GST) tax.

US income tax applies primarily to US citizens and US residents. Residency for income tax purposes is determined largely through objective tests based on physical presence in the US over a prescribed period. Green card holders are treated as US residents for income tax purposes, irrespective of the time actually spent in the US. As a result, US citizens and residents are taxed on their worldwide income.

Transfer taxes operate on a different footing. While they also apply to US citiz...