US Tax Filing Basics for NRIs
This page is an orientation, not a substitute for the detailed guides on DTAA, account reporting, or property sales. It's here to connect the dots: what a US tax resident with India-source income actually has sitting on their plate each filing season, and which of the other guides in this section covers each piece in depth.
This guide explains how the rules generally work and is not tax, legal, or investment advice. Rates, thresholds, and form numbers change with each Union Budget and Finance Act, and your own situation (which country you live in, your visa or citizenship status, how the asset was funded) can change the answer. Confirm your specific case with a chartered accountant or tax advisor before you file anything or move money.
The starting principle: worldwide income
US citizens and US tax residents, including green card holders, are taxed on worldwide income, not just US-source income. That means NRO or NRE interest, dividends from Indian investments, rental income from Indian property, and capital gains from selling Indian assets all generally belong on your US return, in addition to whatever India requires. This is the single fact that makes NRI tax filing more complex than either country's filing alone.
The pieces, and where each is covered
- Avoiding double taxation on India-source income: claim the DTAA rate in India (Form 41 plus your US Tax Residency Certificate) and the US foreign tax credit (Form 1116). Covered in the US-India DTAA guide.
- Reporting your NRE/NRO accounts themselves: FBAR if combined foreign account balances exceed $10,000 at any point in the year, and possibly FATCA Form 8938 on top of that at higher, filing-status-dependent thresholds. Also covered in the DTAA guide.
- Selling property in India: India withholds tax at the sale (TDS), and you'd generally claim US credit for that against any US tax on the same gain. See Selling Property in India as an NRI for the India side of this.
- Withdrawing EPF or EPS: India's tax-free-after-5-years rule and the EPS pension mechanics are covered in What Happens to Your PF Account When You Move Abroad. The US side may involve its own reporting depending on how the withdrawal is structured; that's a good specific question to bring to a preparer familiar with Indian retirement accounts.
- Sending money between the two countries: not itself a tax event for routine transfers of your own funds, but see How to Send Money From the USA to India for the cost side, and talk to a preparer if a transfer is large enough that gift or estate considerations could apply.
Why the order of operations matters
Handle the India-side DTAA claim first where you can. Getting Form 41 and your Tax Residency Certificate in place before India withholds tax means less gets withheld in the first place, and it also protects your full US foreign tax credit, since the US generally only credits tax up to the treaty-reduced rate you were entitled to claim, whether or not you actually claimed it. Filing the India side late, or not at all, tends to cost money on both sides of the return, not just one.
Frequently asked questions
I only have a small amount of interest income in India. Do I still need to report it?
If you're a US citizen or resident for tax purposes, the US taxes worldwide income, so yes, even small amounts of foreign interest or dividend income are generally reportable on your US return, separate from any FBAR or FATCA account-reporting thresholds.
Does my green card status matter here, or only citizenship?
Both. Green card holders are treated as US tax residents for these purposes the same way citizens are, regardless of how much time they actually spend in the US in a given year, unless a specific treaty tie-breaker or expatriation rule applies.
Where do I actually start if I have never reported Indian income on a US return?
Talk to a tax preparer experienced with foreign income and FBAR/FATCA specifically, not just a general preparer. If prior years were missed, the IRS has specific voluntary compliance procedures for correcting past omissions, and getting professional guidance before you file anything is worth it given how much these rules interact.