Americans in India: US and Indian tax guide
If you are a US citizen or green card holder living in India, you are subject to tax obligations in both countries. India taxes residents on worldwide income, and the United States taxes its citizens and permanent residents on worldwide income regardless of where they live.
That dual obligation is the central challenge for Americans in India.
Key takeaways:
- Your Indian tax residency status – resident, non-resident, or “not ordinarily resident” – determines which income India can tax.
- US citizens must file a federal return – Form 1040 – every year, no matter where they live.
- The US-India tax treaty can reduce double taxation, but it does not eliminate your US filing requirement.
Suppose you are an American working in Mumbai on a two-year assignment. India will likely treat you as a resident and tax your Indian salary. The US will also expect you to report that salary on Form 1040.
Credits, exclusions, and the treaty help prevent paying the same tax twice – but only if you file correctly in both countries.
This guide covers how taxes in India work for Americans, what you owe on both sides, and how to stay compliant.
Overview of taxation in India for expats
India uses a residency-based tax system. If India considers you a resident, your worldwide income is potentially taxable there.
If you qualify as a non-resident, India taxes only your Indian-source income – salary earned in India, rent from Indian property, capital gains on Indian assets, and similar items.
For American expats, the first step is always determining your Indian residency status.
That status drives everything: which income India can reach, which deductions and exemptions you may claim, and how the US-India tax treaty applies.
What matters first – a quick checklist:
- Residency status: Count your days in India during the financial year – April 1 through March 31.
- Income source: Identify whether your income is earned in India, paid from India, or connected to Indian assets.
- US filing triggers: Confirm whether your gross income exceeds $15,750 single / $31,500 married filing jointly for tax year 2025.
India’s taxation system also distinguishes between direct taxes – income tax and capital gains tax – and indirect taxes such as GST. Most American expats deal primarily with income tax and, if they hold Indian investments or property, capital gains tax.
The practical difference between resident and non-resident status is significant. A resident who qualifies as “ordinarily resident” – or ROR – owes Indian tax on worldwide income, including US-source dividends, interest, and capital gains.
A non-resident owes Indian tax only on income sourced within India. Understanding which category you fall into is the first thing to get right.
Expat taxation in India follows the same rules that apply to any Indian resident or non-resident – there is no separate expat tax regime. Your residency status determines your obligations, not your nationality or visa type.
Who has to pay taxes in India?
Anyone who earns Indian income or qualifies as a tax resident of India must pay taxes there. For Americans, the question is not whether you have a US obligation – you do – but whether India also has a claim on your income.
India divides taxpayers into four residency categories, each with different tax treatment:
| Status | Day-count rule | Taxed on Indian income? | Taxed on foreign income? | Typical expat example |
|---|---|---|---|---|
| Resident and Ordinarily Resident (ROR) | Meets resident test + additional conditions (see below) | Yes | Yes | Long-term American resident in India for 10+ years |
| Resident but Not Ordinarily Resident (RNOR) | Meets basic resident test but not additional conditions | Yes | Only if derived from an Indian business or profession | American on a 2–3 year assignment who recently moved to India |
| Non-Resident (NRI) | Fewer than 182 days in India during the FY, and not meeting the 60-day-plus-365-day extended presence test | Yes | No | American visiting India for short projects |
| Deemed Resident | Indian citizen with Indian income above ₹15 lakh, not “liable to tax” in any other country | Yes | No (except income from an Indian-controlled business or profession) | Indian-American with no foreign tax residence |
If you are an American expat on a typical corporate assignment, you will most likely start as RNOR for the first year or two, which limits India’s reach to Indian-source income only.
The longer you stay, the more likely you are to become ROR and face worldwide taxation in India as well as the US.
How to determine tax residency
Your Indian tax residency is determined by how many days you spend in India during a financial year – April 1 through March 31 – and, for returning citizens, your history over preceding years. The test is mechanical: it runs on days, not on intent or visa type.
Step 1 – Basic resident test.
You are a “resident” of India for a financial year if you meet either condition:
- You are in India for 182 days or more during the financial year, OR
- You are in India for 60 days or more during the financial year AND 365 days or more during the four preceding financial years.
Important exception: The 60-day threshold is raised to 182 days for Indian citizens who leave India for employment abroad. It is raised to 120 days for Indian citizens or persons of Indian origin – PIOs – whose total Indian income, excluding foreign-source income, exceeds ₹15 lakh.
If you do not meet either condition, you are a non-resident – NRI – for that year.
Step 2 – ROR vs RNOR.
Passing the basic resident test makes you a “resident,” but not necessarily ROR. To be Resident and Ordinarily Resident, you must also satisfy both additional conditions:
- You have been a resident of India in at least 2 of the 10 preceding financial years, AND
- You have been in India for 730 days or more during the 7 preceding financial years.
If you are a resident but fail either additional condition, you are RNOR. This distinction matters because RNOR status shields your foreign income – other than income from an Indian business or profession – from Indian tax.
Example: An American who moves to India in April 2025 and stays through March 2026 – the full FY 2025-26 – will be in India for 365 days, clearly meeting the 182-day basic test.
However, if this is the first year of residence, the person will not meet the “2 of 10” lookback test and will be RNOR – taxed only on Indian-source income.
| Days in India (FY 2025-26) | Prior-year history | Result |
|---|---|---|
| 182+ days | Resident in 2+ of last 10 FYs AND 730+ days in last 7 FYs | ROR – worldwide income taxable |
| 182+ days | Does NOT meet both additional conditions | RNOR – Indian-source income only |
| Fewer than 182 days (and does not meet the 60+365 test) | Any | NRI – Indian-source income only |
A common mistake is assuming that 182 days in India automatically means worldwide taxation. It does not. The additional lookback conditions must also be met.
If you are new to filing as a US expat, see how US tax obligations work for Americans abroad before tackling the Indian side.
India resident qualifications
To qualify as a resident of India, you must meet one of two day-count thresholds during the financial year – April 1 through March 31:
- 182 days or more in India during the FY, OR
- 60 days or more in India during the FY plus 365 days or more during the four preceding FYs.
Exact thresholds and exceptions:
| Rule | Threshold | Applies to |
|---|---|---|
| Standard | 182 days in FY | Everyone |
| Extended presence | 60 days in FY + 365 days in prior 4 FYs | General rule for non-citizens |
| Employment abroad | 182 days in FY (60-day rule does not apply) | Indian citizens leaving India for employment |
| High-income returning citizen/PIO | 120 days in FY + 365 days in prior 4 FYs (if Indian income > ₹15 lakh) | Indian citizens and PIOs |
Common mistakes to watch for:
- Transit days count. The day you arrive in India and the day you depart both count toward your total. If your flight lands at 11:55 PM, that is still a day in India.
- Visa type is irrelevant. Your residency status depends on physical presence, not on whether you hold a tourist, business, or employment visa.
- The financial year runs April–March. If you are counting days for calendar year 2025, remember that India’s FY 2025-26 started on April 1, 2025, and ends on March 31, 2026.
Non-Resident qualifications in India
You are a non-resident – NRI – for Indian tax purposes if you do not meet either of the basic resident day-count tests during the financial year. In practice, most Americans who spend fewer than 182 days in India and do not have a long prior-year presence history will be NRIs.
As an NRI, India taxes only your Indian-source income. That includes:
- Salary received in India or for services performed in India
- Rent from property located in India
- Capital gains on transfer of assets situated in India – shares in Indian companies, Indian real estate –
- Interest from Indian bank accounts or bonds
- Dividends from Indian companies
Income earned entirely outside India – your US salary, US investment returns, US rental income – is not taxable in India if you are an NRI.
Common non-resident scenarios for Americans:
- A consultant who flies to India for a 3-month project, then returns to the US
- A remote worker based in the US whose company is Indian but whose work is performed outside India
- An American with Indian rental property who visits India briefly each year
Even as an NRI, you may still need to file an Indian tax return if your Indian-source income exceeds the basic exemption limit or if TDS – tax deducted at source – was withheld and you want a refund.
If you’re selling property in India as an NRI, see this step-by-step guide to the Indian tax rules, TDS, exemptions, and US reporting requirements.
RNOR and ROR qualifications
RNOR – Resident but Not Ordinarily Resident – is a transitional status that limits India’s taxing reach even though you qualify as a resident. ROR – Resident and Ordinarily Resident – gives India the broadest possible claim – worldwide income.
Side-by-side comparison:
| RNOR | ROR | |
|---|---|---|
| Who qualifies | Meets basic resident test (182 days or 60+365) but fails at least one additional condition | Meets basic resident test AND both additional conditions |
| Additional condition 1 | Has NOT been resident in 2+ of the last 10 FYs | Has been resident in 2+ of the last 10 FYs |
| Additional condition 2 | Has NOT spent 730+ days in India in the last 7 FYs | Has spent 730+ days in India in the last 7 FYs |
| Scope of Indian taxation | Indian-source income + income from a business or profession controlled from India | Worldwide income |
| Planning impact | Foreign salary, investment income, and capital gains remain outside India’s reach | No shelter – all income is taxable in India |
Why RNOR matters for expats: If you have recently moved to India, you will likely be RNOR for the first two or three financial years. During that window, your US investment portfolio, US rental income, and other foreign income are not taxable in India.
This is one of the most significant planning opportunities for Americans relocating to India.
If you’re a returning Indian citizen or person of Indian origin who qualifies as a resident only because your Indian income exceeds ₹15 lakh (the 120-day rule), you’re automatically treated as RNOR for that year, regardless of your prior-year presence history.
Once you cross both lookback thresholds, your status shifts to ROR and India can tax everything – just as the US does.
At that point, you are dealing with full double-taxation exposure, and the FTC, FEIE, and tax treaty become critical relief tools.
Deemed resident qualifications
India’s deemed-resident rule under section 6, subsection 1A, of the Income Tax Act can treat an Indian citizen as a resident even without physical presence in India.
The rule targets Indian citizens who have significant Indian income but are not “liable to tax” in any other country by reason of domicile, residence, or similar criteria.
Who should pay attention:
- Indian-born Americans who maintain Indian income sources – rent, business income, capital gains – but no longer live in India or any other country that treats them as tax residents
- Indian citizens who travel frequently and do not establish clear tax residence anywhere
How the rule works in practice: If you are an Indian citizen, your total income from Indian sources – excluding foreign-source income – exceeds ₹15 lakh – approximately $15,900 –, and you are not “liable to tax” in any other country, India may treat you as a deemed resident
In that case, you’re automatically classified as RNOR – Resident but Not Ordinarily Resident – for that year. India taxes your Indian-source income and any income from a business controlled from India or a profession set up in India, but your other foreign-source income – US investments, foreign bank interest, non-Indian rental income – stays outside India’s reach.
Important: “Liable to tax” is not the same as “actually paying tax.” The test asks whether another country has the legal right to tax you based on your domicile, residence, or similar connection – not whether you owe tax there in a given year.
A US citizen is generally “liable to tax” in the US by reason of citizenship, which typically means this rule does not apply to Americans. However, the interaction can be complex if you hold dual citizenship or are navigating a transition between countries.
The deemed-resident rule is separate from the ordinary day-count residency test. A person can fail the 182-day test entirely and still be caught by this provision.
Types of taxes in India
India imposes several types of taxation covering income, consumption, property, and capital transactions. For American expats, income tax is the primary concern, but other taxes can apply depending on your situation.
Tax types at a glance:
| Category | Tax | What expats typically encounter |
|---|---|---|
| Income tax | Individual income tax (slabs or flat rates) | Salary, freelance income, interest, dividends |
| Capital gains | Short-term and long-term capital gains tax | Sale of Indian property, shares, or mutual funds |
| Indirect taxes | GST (Goods and Services Tax) | Consumer purchases, contractor invoices |
| Property | Municipal property tax, stamp duty | Owning or buying Indian real estate |
| Corporate | Corporation tax | Only if operating a company in India |
| Social security | Provident Fund / ESI contributions | Salaried employees through Indian employers |
State taxes in India are handled differently than in the US. India does not have state income taxes.
Instead, states collect revenue through property taxes, stamp duties on real estate transactions, vehicle taxes, and their share of GST.
If you are accustomed to the US state-tax landscape – where each state sets its own income tax rate – India’s system is simpler: the central government handles income tax, and states focus on transaction and property levies.
Property owners face municipal taxes that differ by city – rates are set by each municipal corporation, not by the central government.
New regime vs old regime: Which one is better for Americans in India?
The tax regime in India that applies to you depends on which structure you choose. For FY 2025-26, India offers two options: the new regime – section 115BAC, now the default – and the old regime – which preserves most traditional deductions and exemptions.
Side-by-side comparison:
| Feature | New regime – section 115BAC – | Old regime |
|---|---|---|
| Tax slabs | 7 brackets, 0% to 30% – see slab tables below – | 4 brackets, 0% to 30% |
| Standard deduction (salaried) | ₹75,000 | ₹50,000 |
| Section 80C deductions – PPF, ELSS, insurance, and others – | Not available | Up to ₹1.5 lakh |
| HRA exemption | Not available | Available |
| Section 80D – health insurance – | Not available | Up to ₹25,000–₹50,000 |
| Section 87A rebate | ₹60,000 – income up to ₹12 lakh effectively tax-free, or ₹12.75 lakh with standard deduction – | ₹12,500 (income up to ₹5 lakh tax-free) |
| Surcharge cap | 25% – even above ₹5 crore – | 37% (above ₹5 crore) |
| Default | Yes – applies unless you opt out | Must actively opt in |
Quick decision checklist for Americans in India:
The new regime generally benefits you if:
- Your Indian salary is your primary income, and you do not claim heavy deductions – no HRA, no Section 80C investments, limited insurance premiums
- Your total income falls within the ₹12.75 lakh effective tax-free zone under the new regime
- You prefer simplicity – the new regime requires less documentation
The old regime may benefit you if:
- You claim significant deductions: HRA, Section 80C – ₹1.5 lakh for PPF, ELSS, life insurance –, Section 80D – health insurance –, home loan interest under Section 24
- Your total deductions exceed roughly ₹3.75 lakh – the approximate breakeven above which the old regime’s lower base often beats the new regime’s wider slabs
- You are a senior citizen – age 60 and over – with the higher basic exemption limit of ₹3 lakh
Example: An American earning ₹20 lakh gross salary in India with ₹2 lakh in Section 80C investments and ₹50,000 in HRA benefits. Under the new regime, the tax – before cess – is approximately ₹1,85,000. Under the old regime with those deductions, the tax is approximately ₹3,37,500 – note that only ₹1.5 lakh of the ₹2 lakh Section 80C investment is deductible, since ₹1.5 lakh is the statutory cap.
In this scenario, the new regime wins. But if the same person had ₹4.5 lakh in combined deductions, the old regime pulls ahead.
The choice must be made when filing your Indian return. Salaried employees with no business income can switch between regimes each year. If you have business or professional income, the choice is more restrictive.
If you also need to decide between the FEIE and Foreign Tax Credit on the US side, see how the two relief methods compare before filing.
Income tax slabs in India – new regime under section 115BAC
The new tax slab in India under section 115BAC applies by default for FY 2025-26 – assessment year 2026-27. These rates are the same regardless of age – unlike the old regime, there is no separate slab for senior or super-senior citizens.
New regime rates – FY 2025-26:
| Taxable income (₹) | Tax rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Under the new tax regime in India, the standard deduction for salaried individuals is ₹75,000. Combined with the section 87A rebate of ₹60,000, a salaried person with total income up to ₹12,75,000 pays zero income tax under the new regime.
The highest tax bracket in India under the new regime is 30%, but it applies only to income above ₹24 lakh. A person earning ₹15 lakh does not pay 15% on all ₹15 lakh – they pay 0% on the first ₹4 lakh, 5% on the next ₹4 lakh, 10% on the next ₹4 lakh, and 15% on the final ₹3 lakh.
A 4% Health and Education Cess is applied on top of the income tax amount – and surcharge, if applicable. Surcharge is covered in a separate section below.
Minimum taxable income in India, and when you may still need to file
The basic exemption limit – the minimum taxable income below which no income tax is owed – depends on which regime you choose:
| Regime | Basic exemption limit | Effective tax-free with rebate |
|---|---|---|
| New regime – section 115BAC – | ₹4,00,000 | ₹12,75,000 – with standard deduction – |
| Old regime (below 60) | ₹2,50,000 | ₹5,00,000 |
| Old regime (60–79, senior citizen) | ₹3,00,000 | ₹5,00,000 |
| Old regime (80+, super senior) | ₹5,00,000 | ₹5,00,000 |
Taxable income in India includes salary, rental income, capital gains, interest, dividends, and business or professional income earned in or connected to India – for residents, worldwide income.
Even if your income falls below the basic exemption limit, you may still need to file an Indian tax return if:
- TDS – tax deducted at source – was withheld from your income and you want to claim a refund
- You have capital losses to carry forward for offset against future gains
- You hold foreign assets or signing authority over foreign accounts – a disclosure requirement for Indian residents
- Your total gross income before deductions exceeds the exemption limit, even if deductions bring your taxable income below it
Filing in India is separate from your US obligation.
Even if India does not require a return, the US requires you to file if your gross income exceeds the US filing threshold – $15,750 single or $31,500 married filing jointly for tax year 2025.
Old tax regime – standard slab structure
The old tax regime in India preserves access to most traditional deductions and exemptions – Section 80C, HRA, home loan interest, medical insurance, and dozens of others. You must actively opt into this regime; the new regime applies by default.
Old regime rates – FY 2025-26 – individuals below 60 –:
| Taxable income (₹) | Tax rate |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Senior citizen tax slab in India – age 60 to 79, old regime –:
| Taxable income (₹) | Tax rate |
|---|---|
| Up to ₹3,00,000 | Nil |
| ₹3,00,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Super-senior citizens – age 80 and over – get a higher nil band of ₹5,00,000 under the old regime, with 20% from ₹5,00,001 to ₹10,00,000 and 30% above.
The key advantage of the old regime is the deduction toolkit. Under Section 80C alone, you can deduct up to ₹1.5 lakh for contributions to PPF, ELSS mutual funds, life insurance premiums, tuition fees, and similar qualified investments.
Add Section 80D – health insurance premiums –, Section 24 – home loan interest up to ₹2 lakh –, and HRA, and the old regime’s higher headline rates can still produce a lower effective tax.
The standard deduction for salaried taxpayers under the old regime is ₹50,000 – compared to ₹75,000 under the new regime.
The income tax rate in India under the old regime tops out at 30% above ₹10 lakh – the same headline rate as the new regime, but with fewer intermediate brackets.
The section 87A rebate under the old regime is ₹12,500, making income up to ₹5 lakh effectively tax-free. Compare that to the new regime’s ₹60,000 rebate and ₹12.75 lakh effective tax-free threshold.
Surcharge – individuals
India applies a surcharge – an additional percentage on top of your calculated income tax – for higher-income individuals. The surcharge rates and caps differ between the new and old regimes.
New regime surcharge rates – FY 2025-26:
| Taxable income (₹) | Surcharge rate |
|---|---|
| Up to ₹50 lakh | Nil |
| ₹50 lakh – ₹1 crore | 10% |
| ₹1 crore – ₹2 crore | 15% |
| Above ₹2 crore | 25% (capped) |
Under the new regime, the surcharge is capped at 25% regardless of income level.
Old regime surcharge rates – FY 2025-26:
| Taxable income (₹) | Surcharge rate |
|---|---|
| Up to ₹50 lakh | Nil |
| ₹50 lakh – ₹1 crore | 10% |
| ₹1 crore – ₹2 crore | 15% |
| ₹2 crore – ₹5 crore | 25% |
| Above ₹5 crore | 37% |
How surcharge, cess, and slabs interact: The slab rates determine your base income tax. Surcharge is calculated as a percentage of that base tax – not of income. Then, a 4% Health and Education Cess is applied to the sum of base tax plus surcharge.
Example: If your base income tax under the new regime is ₹5,00,000 and your income exceeds ₹1 crore, the surcharge is 15% of ₹5,00,000 = ₹75,000. The total before cess is ₹5,75,000. Cess = 4% × ₹5,75,000 = ₹23,000. Final tax: ₹5,98,000.
The surcharge cap difference between regimes is worth noting for high earners. Under the old regime, incomes above ₹5 crore face a 37% surcharge, pushing the effective marginal rate above 42%. Under the new regime, the 25% cap keeps the effective marginal rate closer to 39%.
How to calculate Indian income tax: Worked example
This is based on a common scenario we see at TFX – an American on a salaried assignment in India, filing under the new regime for FY 2025-26.
Scenario: US citizen working in Bangalore. Gross salary of ₹25,00,000 – approximately $26,500. No other Indian income. New regime chosen.
Step 1 – Gross income:
| Component | Amount (₹) |
|---|---|
| Gross salary | 25,00,000 |
Step 2 – Deductions under the new regime:
| Deduction | Amount (₹) |
|---|---|
| Standard deduction | 75,000 |
| Taxable income | 24,25,000 |
Step 3 – Apply new regime slabs:
| Slab (₹) | Rate | Tax (₹) |
|---|---|---|
| 0 – 4,00,000 | 0% | 0 |
| 4,00,001 – 8,00,000 | 5% | 20,000 |
| 8,00,001 – 12,00,000 | 10% | 40,000 |
| 12,00,001 – 16,00,000 | 15% | 60,000 |
| 16,00,001 – 20,00,000 | 20% | 80,000 |
| 20,00,001 – 24,00,000 | 25% | 1,00,000 |
| 24,00,001 – 24,25,000 | 30% | 7,500 |
| Total slab tax | 3,07,500 |
Step 4 – Surcharge:
Taxable income of ₹24,25,000 is below the ₹50 lakh surcharge threshold. Surcharge = ₹0.
Step 5 – Health and Education Cess:
4% × ₹3,07,500 = ₹12,300
Step 6 – Total Indian income tax:
₹3,07,500 + ₹0 + ₹12,300 = ₹3,19,800
This is the Indian tax liability before any treaty relief or foreign tax credits.
On the US side, this Indian tax may be creditable against your US federal tax on the same income using Form 1116 (Foreign Tax Credit).
Alternatively, you may exclude a portion of your foreign earned income using the FEIE – up to $130,000 for tax year 2025.
Filing a tax return in India
If your Indian income exceeds the basic exemption limit – or if you need to claim a TDS refund, carry forward losses, or comply with foreign asset disclosure rules – you must file an Indian income tax return – ITR.
India’s tax department manages returns through the e-filing portal at incometax.gov.in. You will need a PAN – Permanent Account Number –, which serves as India’s taxpayer identification number. If you do not already have a PAN, you can apply online.
What you need before filing:
- PAN card
- Form 16 – your employer’s salary certificate, similar to a US W-2
- Form 26AS or Annual Information Statement, known as AIS – a summary of TDS withheld, taxes paid, and financial transactions reported to the Indian tax department
- Bank account details for refund deposit
- Details of foreign assets and income if you are a resident
Returns are filed electronically for the relevant assessment year, or AY. For FY 2025-26, the assessment year is AY 2026-27. The official portal at incometax.gov.in handles registration, form downloads, and electronic filing.
When to file a tax return
Filing deadlines for Indian tax returns depend on your taxpayer category:
| Taxpayer type | Filing deadline (AY 2026-27) | Why it matters |
|---|---|---|
| Individuals – no audit required – ITR-1, ITR-2 | July 31, 2026 | Late filing triggers penalties and interest |
| Individuals or professionals with business income, no audit required – ITR-3, ITR-4 | August 31, 2026 | Applies to most freelancers and small business owners |
| Belated return | December 31, 2026 | Last chance to file a return you missed the original deadline for |
| Revised return | March 31, 2027, or before assessment completes, whichever is earlier | Last chance to correct errors in a return already filed – note that revising after December 31, 2026 attracts a fee (₹1,000 if income is up to ₹5 lakh, ₹5,000 if higher) |
Most American expats in India use ITR-2 – individuals with salary, capital gains, foreign income, and foreign assets but no business income – or ITR-3 – if you have business or professional income.
Filing after the deadline triggers a late-filing fee of ₹5,000 – reduced to ₹1,000 if total income is below ₹5 lakh – and interest under Section 234A at 1% per month on unpaid tax.
Early preparation reduces the risk of penalties and makes it easier to coordinate with your US return.
The US has its own set of deadlines – April 15, with an automatic extension to June 15 for Americans abroad.
How to file a tax return
Filing your Indian tax return is done online through the official portal at incometax.gov.in. Here is the step-by-step process:
- Register or log in at incometax.gov.in using your PAN. First-time filers need to create an account and link it to their Aadhaar – India’s biometric ID – if applicable. NRIs without Aadhaar can file with PAN alone.
- Gather your documents. Download Form 26AS and your AIS from the portal. These show all TDS withheld, advance tax paid, and high-value transactions reported to the tax department. Cross-check these against your Form 16 and bank statements.
-
Select the correct ITR form. Most American expats will use:
– ITR-2: Salary income, capital gains, foreign assets, more than one house property, or income from sources outside India
– ITR-3: Business or professional income in addition to the above - Fill in the return. The portal offers both an online form and a downloadable utility. Enter income details, claim deductions if opting for the old regime, report foreign assets – Schedule FA, similar in concept to the US FBAR –, and compute tax.
- Verify and submit. E-verify using Aadhaar OTP, net banking, or digital signature. Alternatively, send a signed physical copy – the ITR-V – to the Centralized Processing Center in Bengaluru within 30 days.
You can also file through authorized tax-preparation software or a chartered accountant in India.
For Americans dealing with both Indian and US returns, working with a preparer who understands cross-border filing obligations is important to ensure consistent treatment on both sides.
Penalties for late or incorrect filing
Filing your Indian return late or incorrectly carries financial consequences. Here is what you face:
| Issue | Consequence | How to avoid it |
|---|---|---|
| Late filing (after your applicable due date – July 31 or August 31, depending on your ITR form) | Late fee: ₹5,000 (₹1,000 if income < ₹5 lakh). Interest: 1% per month on unpaid tax under Section 234A. | File by the due date or pay estimated tax in advance |
| Underreporting income | Penalty of 50% of the tax on underreported income under Section 270A | Reconcile Form 26AS/AIS with your return before filing |
| Misreporting income | Penalty of 200% of the tax on misreported income under Section 270A | Do not understate income or claim false deductions |
| Not filing at all | All of the above, plus potential prosecution for willful default in extreme cases | File even if late – a belated return is better than no return |
Common filing mistakes that trigger problems:
- Forgetting to report interest from Indian savings accounts – banks deduct TDS, but you must still report the gross interest –
- Failing to disclose foreign assets on Schedule FA if you are an Indian resident
- Claiming deductions under the old regime without actually opting out of the new regime
- Not reconciling TDS credits – if your Form 26AS shows TDS you did not claim, you lose money; if it shows TDS that was not actually withheld, you trigger a mismatch notice
A late Indian filing does not, by itself, disqualify you from claiming US-India treaty benefits. Treaty eligibility is governed by the treaty’s own provisions and the IRS’s procedural rules, not by your Indian compliance status.
However, penalties, interest, and lost carry-forward opportunities are reason enough to file on time.
On the US side, penalties for late filing are separate and often steeper. Failure-to-file penalties run 5% per month – up to 25% – on unpaid tax.
The minimum penalty for returns filed more than 60 days late is $525 for returns due after December 31, 2025.
If you have unfiled returns from prior years, understand how the IRS handles late expat filings before deciding your next step.
Other taxes in India
Beyond income tax, India imposes several other taxes that American expats may encounter. Most are situational – they apply only if you engage in specific transactions or own certain types of assets.
| Tax | Who pays | Relevance for expats |
|---|---|---|
| GST (Goods and Services Tax) | Consumers, contractors, businesses | Included in most purchases; business owners may need to register |
| Corporation tax | Companies incorporated in India | Relevant only if you own or operate an Indian company |
| Capital gains tax | Anyone selling Indian assets | Common for expats selling property or shares |
| Stamp duty | Buyers of real estate | Paid when purchasing property; rates vary by state |
| Property tax | Property owners | Annual municipal tax; varies by city |
| Securities Transaction Tax (STT) | Investors trading on Indian exchanges | Deducted automatically on stock market trades |
Items that generally do not create cross-border surprises for expats: customs duties – handled at import –, professional tax – a small state-level levy, typically deducted by employers –, and vehicle tax – only if you own a vehicle in India.
Goods and Services Tax – GST
GST is India’s unified indirect tax on goods and services, replacing the former patchwork of central and state taxes such as VAT, service tax, and excise duty.
It applies mainly at two rates, 5% and 18%, following the GST Council’s rate rationalization effective September 22, 2025. A separate 40% rate applies to luxury and sin goods such as tobacco, high-end vehicles, and aerated beverages, and a small number of items remain at 3% or nil.
As a consumer, you pay GST on most purchases – it is embedded in the price. As a contractor or freelancer invoicing Indian clients, you may need to register for GST if your turnover exceeds the threshold – currently ₹20 lakh for services, ₹40 lakh for goods in most states.
For salaried American expats, GST is similar to a sales tax or VAT – you encounter it when you buy things but do not file GST returns. If you run a business or provide professional services in India, GST registration and compliance become your responsibility.
Corporation tax
India’s corporation tax applies to companies, not to individual expat taxpayers.
Under the standard regime, the rate is 25% for domestic companies with turnover or gross receipts up to ₹400 crore in the preceding financial year, and 30% for companies above that threshold – plus surcharge and cess. Reduced rates are available if a company elects into a concessional regime instead:
- 22% under section 115BAA for domestic companies that forgo certain deductions
- 15% under section 115BAB for new manufacturing companies incorporated on or after October 1, 2019, that also began manufacturing or production by March 31, 2024
An American expat might encounter this tax if you own or direct an Indian company, receive income from one you control, or are considering incorporating a business in India. Otherwise, it does not directly affect your personal return.
If you do operate an Indian entity, the corporate tax treatment interacts with US Subpart F, GILTI, and CFC rules. These are US-side issues that require careful coordination with your US return.
Buyback of shares
When an Indian company buys back its own shares, the tax treatment has changed twice in recent years.
From October 1, 2024 through March 31, 2026, the entire amount was taxed as a deemed dividend, with no deduction for cost of acquisition.
Effective April 1, 2026, capital gains treatment was restored: proceeds minus cost of acquisition are taxed as capital gains, though promoter shareholders face an additional tax pushing their effective rate to roughly 22–30%.
What this means for American expats:
| Aspect | Treatment |
|---|---|
| What is it | A company repurchases shares from existing shareholders |
| Tax on shareholder (India) | Before April 1, 2026: full proceeds taxed as a dividend. On or after April 1, 2026: proceeds minus cost of acquisition taxed as capital gains. |
| US reporting | Buyback income must also be reported on your US return; FTC may apply to avoid double taxation |
If you hold shares in Indian companies that announce buyback programs, be aware that the net proceeds will now appear on your Indian tax return as income.
The cost-basis calculation and potential capital-loss implications are complex, particularly when coordinating between Indian and US tax rules.
Capital gains taxes
Capital gains in India arise when you sell or transfer capital assets – shares, mutual funds, real estate, gold, or other investments. India separates gains into short-term and long-term based on how long you held the asset.
Current rates and holding periods, FY 2025-26:
| Asset type | Short-term holding period | STCG rate | Long-term holding period | LTCG rate |
|---|---|---|---|---|
| Listed equity shares and equity mutual funds | Less than 12 months | 20% | 12 months or more | 12.5% – exempt up to ₹1.25 lakh – |
| Unlisted shares | Less than 24 months | Per slab rate | 24 months or more | 12.5% |
| Real estate | Less than 24 months | Per slab rate | 24 months or more | 12.5% (20% with indexation if acquired before July 23, 2024) |
| Debt mutual funds | Any holding period | Per slab rate | N/A | Taxed at slab rate regardless of holding period |
| Gold, other assets | Less than 24 months | Per slab rate | 24 months or more | 12.5% |
Example
An American who bought an apartment in Mumbai in 2020 and sells it in 2026 holds it for over 24 months. The gain is long-term and taxed at 12.5%. Because the apartment was bought before July 23, 2024, the seller can choose between 12.5% without indexation or 20% with indexation, whichever produces the lower tax bill. Properties bought on or after July 23, 2024, no longer have the indexation option and are taxed at a flat 12.5%.
On the US side, the same transaction creates a capital gains event on your Form 1040. The US taxes long-term capital gains at preferential rates – 0%, 15%, or 20% depending on income.
Indian tax paid on the gain can generally be credited against US tax on the same gain using Form 1116, reducing or eliminating double taxation.
For property transactions specifically, see our NRI guide to selling property in India.
Wealth tax in India
India does not impose a wealth tax. The wealth tax was abolished effective April 1, 2015. It previously applied to individuals with net wealth exceeding ₹30 lakh, but the tax was repealed and replaced by a higher surcharge on high-income earners.
If you see references to Indian wealth tax in older guides or articles, those are outdated. No wealth tax return or payment is required.
Inheritance tax in India
India does not have an inheritance tax or estate tax. There is no Indian levy on assets received through inheritance, whether the deceased was Indian, American, or any other nationality.
However, Americans receiving an inheritance from India should be aware of US-side considerations:
- The US estate tax may apply if the deceased was a US citizen or domiciled in the US, regardless of where assets are located. The estate tax exemption is $13.99 million per person for tax year 2025.
- Gifts and inheritances are generally not taxable income to the recipient for US income tax purposes.
- However, if you receive more than $100,000 from a non-US person, you must report it on Form 3520.
- Income generated by inherited Indian assets – rent, dividends, interest – becomes your taxable income going forward, in both India and the US.
India property tax
Municipal property tax in India is a local tax assessed on real estate owners. Rates and methods vary by city – each municipal corporation sets its own formula based on factors such as built-up area, location, property type, age of construction, and usage.
| What | Details |
|---|---|
| Who pays | Owner of the property – not tenants |
| How assessed | Varies by municipality: some use Annual Rental Value, others use Unit Area System or Capital Value |
| Payment | Typically annual or semi-annual, paid to the local municipal corporation |
| Typical range | Varies widely; a mid-range apartment might owe ₹5,000–₹25,000 annually depending on city and area |
For American expats who own property in India, municipal property tax is a recurring annual obligation separate from any income tax on rental income.
Property tax paid in India is not directly creditable on your US return – the FTC covers income taxes, not property taxes. Rental-income deductions on Schedule E may apply.
Social Security in India
The US and India do not have a totalization agreement. This means there is no bilateral arrangement to coordinate social security contributions between the two countries or to prevent double taxation of social security-type contributions.
In practice, this creates potential dual social security obligations:
- If you work for an Indian employer, you may be required to contribute to India’s Employees’ Provident Fund – EPF – and Employees’ State Insurance – ESI –
- Simultaneously, if you remain covered under US Social Security – which depends on your employment arrangement –, you and your employer may also owe FICA taxes
If you are seconded by a US employer to work in India, your US employer typically continues US Social Security withholding. Your Indian employer – or the Indian entity paying you – may also require EPF contributions, especially for salaried employees earning above a threshold.
Without a totalization agreement, there is no credit or exemption mechanism between the two systems.
Self-employed Americans in India face similar issues: US self-employment tax applies if you are a US citizen or resident, and Indian social security obligations depend on the nature and structure of your work.
The absence of a totalization agreement is one of the key gaps in US-India tax coordination. For specifics on your situation, refer to IRS Publication 54.
Americans earning a salary in India can use Form 2555 to exclude up to $130,000 (2025) of that income from US tax, which can offset the dual social security burden.
The tax treaty between the US and India
The US-India income tax treaty can reduce double taxation on cross-border income, but it does not eliminate your US filing obligation. Every American citizen must file a US return regardless of treaty provisions.
What the treaty does:
- Reduces Indian withholding rates on certain income types – dividends, interest, royalties – below India’s standard domestic rates
- Provides a residency tie-breaker rule for individuals who might otherwise be treated as residents of both countries
- Allows the use of foreign tax credits to offset taxes paid in one country against the tax owed in the other
What the treaty does not do:
- It does not exempt US citizens from filing Form 1040
- It does not override the US “saving clause” – Article 1, paragraph 3 – which allows the US to tax its citizens as if the treaty did not exist, subject to the exceptions listed in paragraph 4
- It does not cover all income types equally – some categories get reduced rates, others do not
Treaty withholding rates – selected categories –:
| Income type | Treaty rate | India domestic rate – without treaty – |
|---|---|---|
| Dividends – portfolio, 10%+ ownership – | 15% / 25% | 20% |
| Interest | 10% / 15% | 20% |
| Royalties / Fees for technical services | 10% / 15% | 20% (plus surcharge and cess) |
To claim treaty benefits, you may need to file specific forms in both countries. In India, you typically need a Tax Residency Certificate – TRC – and Form 10F.
In the US, you report treaty positions on Form 8833 if claiming a treaty-based return position.
The treaty’s saving clause is critical for Americans: even where the treaty would otherwise reduce US tax, the saving clause generally preserves the US’s right to tax its own citizens. The main exceptions are certain pension, Social Security, and alimony provisions.
The US-India treaty also addresses tie-breaker rules for dual residents, special provisions for teachers and researchers, and specific carve-outs for pension income.
India tax forms for US expats
India’s income tax forms are issued annually for each assessment year. For FY 2025-26 – AY 2026-27 – the relevant forms are available on the e-filing portal at incometax.gov.in.
Common India-side forms:
| Form | What it does | Who needs it |
|---|---|---|
| ITR-1 (Sahaj) | Simple return for residents with salary, up to two house properties, and other sources up to ₹50 lakh | Not typically used by US expats (NRIs cannot use ITR-1) |
| ITR-2 | Individuals with salary, capital gains, foreign income, foreign assets, and more than one property | Most common form for American expats |
| ITR-3 | Individuals with business or professional income | Expats running a business in India |
| Form 16 | TDS certificate from employer – similar to a US W-2 | All salaried employees |
| Form 26AS | Annual tax statement showing TDS, advance tax, and refunds | Everyone – verify before filing |
| AIS (Annual Information Statement) | Comprehensive record of financial transactions | Everyone – cross-check against your return |
| Form 10F | Declaration for claiming treaty benefits | Expats claiming reduced withholding under the US-India treaty |
US tax forms and filing requirements for Americans in India
As a US citizen or green card holder, your US tax obligations continue regardless of where you live. Here is what you need to file from India:
US-side compliance checklist:
| Form/Requirement | When it applies | What triggers it |
|---|---|---|
| Form 1040 | Always | Gross income above $15,750 single / $31,500 MFJ (2025) |
| Form 2555 (FEIE) | If excluding foreign earned income | Foreign earned income up to $130,000 (2025); must meet bona fide residence or physical presence test |
| Form 1116 (FTC) | If claiming foreign tax credits | Indian income tax paid; de minimis exception: $300 single / $600 MFJ if only passive category income |
| FBAR (FinCEN 114) | If foreign accounts exceed $10,000 aggregate at any point | Indian bank accounts, PPF, demat accounts; due April 15, auto-extended to October 15 |
| Form 8938 (FATCA) | If foreign financial assets exceed thresholds | $200,000 (single, end of year) / $300,000 (at any point) for taxpayers abroad; $400,000 / $600,000 for MFJ |
| Form 8833 | If claiming a treaty-based position | Any return position that relies on the US-India treaty |
Streamlined Foreign Offshore Procedures cover the full US reporting package for qualifying expats abroad, including prior-year Form 1040 filings, FBARs, and Form 8938, under a single non-willful certification.
Key US filing deadlines for Americans abroad:
- April 15 – Standard filing deadline – taxes due regardless of extension –
- June 15 – Automatic extension for Americans abroad – no form needed, but interest accrues from April 15 –
- October 15 – Extended deadline – file Form 4868 by April 15 –
- December 15 – Discretionary additional extension – request in writing to the IRS –
The October 15 extension is not “final” for all taxpayers. Americans abroad who need additional time may request a discretionary extension to December 15 by writing to the IRS, though this is not automatic.
Filing your US return from abroad can be done electronically.
The challenge is coordinating the Indian tax year – April through March – with the US tax year – January through December – and ensuring consistent income and credit reporting across both returns.
Stay compliant with US expat taxes in India
Managing tax obligations in two countries requires consistent record-keeping and timely filing – whether you file your income tax in Pune, Mumbai, or any other Indian city. Here is a compliance checklist for Americans in India:
- Track your days. Keep a log of days spent in India, the US, and third countries. Your Indian residency status, FEIE physical presence test, and treaty tie-breaker all depend on accurate day counts.
- Collect records. Maintain copies of Form 16, Form 26AS, AIS, Indian tax returns, PAN, and any treaty-related documents. On the US side, keep W-2s, 1099s, FBAR records, and Form 8938 supporting documentation.
- Pay Indian tax on time. Advance tax installments are due quarterly – June 15, September 15, December 15, and March 15 of the financial year – if your expected tax liability exceeds ₹10,000.
- Coordinate credits and exclusions. Decide whether the FEIE or FTC or a combination produces the better result for your situation. The FEIE excludes up to $130,000 (2025) of foreign earned income from US tax; the FTC gives a dollar-for-dollar credit for Indian income tax paid.
- You generally cannot use the FTC on income you already excluded under the FEIE.
- File Indian and US returns. India’s deadline is July 31 – most individuals – and the US deadline for Americans abroad is June 15 – auto-extended – or October 15 with Form 4868. Coordinate timing to ensure consistent reporting.
- Report foreign accounts and assets. You must file an FBAR if the aggregate value of your foreign accounts exceeds $10,000 at any point during the year.
- Form 8938 applies if foreign financial assets exceed the applicable threshold.
- Indian bank accounts, PPF accounts, demat accounts, and NRE/NRO accounts all count toward both reports.
- Review your treaty position annually. The US-India treaty may reduce withholding on dividends, interest, and royalties.
- Confirm your eligibility and file Form 8833 if claiming a treaty-based position on your US return.
If you need a second opinion on a return you have already filed, our tax return review service can check for missed credits, exclusions, and treaty benefits.
FAQ
Yes. Expatriate taxation in India follows the same residency-based rules that apply to everyone – and the US taxes citizens on worldwide income regardless of where they live.
India taxes residents on worldwide income and non-residents on Indian-source income. You can file your Indian return through the income tax India online portal at incometax.gov.in. Filing in one country does not satisfy the requirement in the other.
The tax on income in India that you pay can be credited dollar-for-dollar against your US tax using the Foreign Tax Credit – FTC. Alternatively, the Foreign Earned Income Exclusion – FEIE – can exclude up to $130,000 (2025) of foreign earned income from US tax.
You can use one or a combination, but you cannot claim the FTC on income already excluded under the FEIE.
The US-India tax treaty also provides relief on certain income types.
The current tax slab in India under the new regime – section 115BAC – starts at 0% on the first ₹4 lakh and rises through six brackets, topping out at 30% above ₹24 lakh. The old regime has fewer brackets but preserves deductions under Sections 80C, 80D, HRA, and home loan interest.
The new regime is the default. The old regime can produce a lower effective rate if your deductions exceed roughly ₹3.75 lakh.
RNOR status limits India’s taxing reach to Indian-source income and income from Indian business or profession. Your US investments, US rental income, and other foreign-source income are not taxable in India during RNOR years.
Most Americans who move to India qualify as RNOR for the first two to three financial years, giving them a planning window before India can tax worldwide income.
Yes, if the aggregate value of all your foreign financial accounts exceeds $10,000 at any point during the calendar year. Indian bank accounts, NRE accounts, NRO accounts, PPF accounts, and demat accounts all count.
The FBAR – FinCEN Form 114 – is due April 15, with an automatic extension to October 15.
You can verify your Indian tax records through the income tax India website at incometax.gov.in.
If you hold accounts in both countries, understand how FBAR compares to Form 8938 before filing – the two reports overlap but have different thresholds and penalties.
Penalties for non-filing are significant: up to $16,536 per report, per year, for non-willful violations, and the greater of $165,353 or 50% of the account balance per violation for willful violations (2025).
No. India does not levy an inheritance tax or estate tax. However, if you are a US citizen, the US estate tax may apply to your worldwide assets. Income generated by inherited Indian assets – rent, dividends – becomes your taxable income going forward, in both countries.
A late ITR in India triggers a fee of ₹5,000 – ₹1,000 if income is below ₹5 lakh – and interest at 1% per month on unpaid tax. You also lose the ability to carry forward certain losses.
Filing late does not, on its own, affect your US-India treaty eligibility, but the financial penalties and lost carryforwards are reason enough to file on time.
No. The treaty’s saving clause, Article 1 paragraph 3, preserves the US’s right to tax its citizens as if the treaty did not exist, subject to the exceptions listed in paragraph 4. The treaty can reduce India’s tax rate on dividends, interest, and royalties below domestic levels and help resolve dual-residency conflicts, but it does not override your obligation to file Form 1040 and report worldwide income to the IRS.
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