A growing community of US citizens and green card holders is living in India in 2026: returning Indian Americans, US founders running Indian operations, US engineers and consultants on long-term assignments and US retirees choosing India for lifestyle reasons. Each of them carries a permanent US tax filing obligation regardless of where they live. The US is one of two countries in the world (the other is Eritrea) that taxes its citizens on worldwide income regardless of residence. For a US expat in India, the compliance picture spans US Form 1040 with all its international elements, Indian tax filing as a resident, RNOR or NRI depending on the day count, and the treaty mechanism that resolves the double taxation. This guide walks through the practitioner-level discipline of US expat tax filing from India.
The Two Filing Sides for a US Expat in India
Side 1: US filing. The US citizen or green card holder files Form 1040 reporting worldwide income (US source plus Indian source plus any third-country source). The return includes the foreign earned income exclusion under Section 911 (Form 2555) where the taxpayer qualifies, the foreign tax credit under Section 901 (Form 1116) for tax paid in India and elsewhere, and the various reporting forms for foreign assets (FBAR via FinCEN 114 for foreign financial accounts, Form 8938 under FATCA for specified foreign financial assets, Form 8621 for PFIC investments and the relevant additional forms depending on the asset mix).
Side 2: Indian filing. The US citizen or green card holder is taxed in India based on their Indian residency status. If resident under the standard 182-day or 60+365-day test, they are taxed on worldwide income. If RNOR (typically for the first 2-3 years after returning to India after a long period abroad), they are taxed on Indian source income plus foreign income from a business controlled in India or a profession set up in India. If NRI (typically for the first year of a short assignment), they are taxed only on Indian source income.
The two filings need to be coordinated. The Indian return positions affect the US return (and vice versa). The foreign tax credit on each side depends on the amounts and timing of tax paid on the other side. The reporting forms on each side reflect different scopes and different threshold tests. A US expat in India who treats the two filings as independent typically ends up paying more tax than they need to and exposing themselves to penalties on one side or the other.
Foreign Earned Income Exclusion (FEIE)
Section 911 of the IRC allows US tax residents whose tax home is in a foreign country and who meet either the bona fide residence test or the physical presence test to exclude a specified amount of foreign earned income from US taxable income. The exclusion limit is indexed annually; in 2026 the limit is approximately USD 130,000.
Bona fide residence test: the taxpayer is a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year. This is a facts-and-circumstances test that considers the nature of the assignment, the intent of the taxpayer, the housing arrangement and any other indicators of bona fide residence.
Physical presence test: the taxpayer is physically present in a foreign country for at least 330 full days during any 12-month period. This is a day-count test that can be met across multiple years (the 12-month window does not have to align with the tax year).
For US expats in India, the physical presence test is typically easier to meet for the first year of the assignment, while the bona fide residence test fits better for longer assignments. The choice affects the planning of US-side travel: too many days back in the US can defeat the physical presence test for the relevant 12-month window.
The FEIE applies to earned income only (salary, wages, professional fees). It does not apply to passive income (interest, dividends, capital gains, rental income). For US expats in India with significant passive income, the FEIE is one piece of the planning but not the whole picture.
Foreign Tax Credit (FTC)
Section 901 of the IRC allows US tax residents to claim a credit for income taxes paid to foreign jurisdictions against US tax on the same income. The credit is subject to per-category limitations under Section 904: passive category, general category, branch category, GILTI category and Section 901(j) category.
For US expats in India, the FTC is typically the most important double-taxation relief mechanism. Indian tax paid on Indian source salary and Indian source investment income is creditable against US tax on the same income, subject to the per-category limitation.
The interaction with FEIE matters. Income excluded under FEIE cannot also generate a FTC; the choice between FEIE and FTC for foreign earned income is made by election, with the right answer depending on the relative US and Indian tax rates and the taxpayer’s specific circumstances. Most US expats in India find FEIE plus FTC on the unexcluded portion is the optimal mix, but the computation needs to be run each year.
Excess FTC can be carried back one year and carried forward 10 years. Strategic timing of FTC utilisation across multiple years can materially reduce total US tax over the life of the expat assignment.
FBAR and FATCA Reporting
FBAR (FinCEN Form 114). US tax residents with aggregate foreign financial accounts exceeding USD 10,000 at any point during the year must file FBAR by April 15 with an automatic extension to October 15. For a US expat in India, foreign financial accounts include Indian bank accounts (savings, current, NRO, NRE, FCNR), Indian brokerage accounts, Indian mutual fund accounts and any other Indian financial accounts.
FBAR penalty for non-willful failure to file: up to USD 10,000 per violation. Willful failure to file: the greater of USD 100,000 or 50 percent of the account balance. The penalty regime is among the most aggressive in the US tax code and the IRS has actively pursued enforcement against US expats with unreported foreign accounts.
FATCA Form 8938. US tax residents with specified foreign financial assets above prescribed thresholds (which vary by filing status and residence) must file Form 8938 with their tax return. The thresholds for a single filer living abroad are currently USD 200,000 on the last day of the tax year or USD 300,000 at any point during the year.
For US expats in India, both FBAR and Form 8938 typically apply. The two forms cover overlapping but not identical scopes. Our standard engagement includes a foreign-assets worksheet that captures every Indian financial account and asset with the supporting documentation, the year-end value, the peak value during the year and any income earned. The worksheet feeds both FBAR and Form 8938 with consistent data.
Streamlined Filing Procedures for Late Compliance
For US expats in India who have not filed prior-year US tax returns or FBARs, the Streamlined Foreign Offshore Procedures provide a structured path back into compliance. The procedure requires filing the prior three years of delinquent tax returns and the prior six years of delinquent FBARs, with a non-willful certification.
The non-willful certification is the key element. The taxpayer must certify that the failure to file was non-willful (negligent, inadvertent or due to good faith misunderstanding of the requirements). Willful failure to file is not eligible for the streamlined procedure and requires the more involved Offshore Voluntary Disclosure Program or direct quiet disclosure.
Penalty implications: for Streamlined Foreign Offshore Procedures, no penalties apply on the late filings. The taxpayer pays the back tax plus interest. The penalty waiver is significant because the alternative (back FBAR penalties at USD 10,000 per non-willful violation across six years) can substantially exceed the back tax.
We have run Streamlined Foreign Offshore Procedures engagements for many US expats in India who discovered their US filing obligation late. The engagement is partner-led, scoped at the start with a fixed fee, and produces a complete compliance package ready for IRS submission.
How Innobrant Engages US Expats in India
The engagement begins with a 60-minute scoping conversation that maps the client’s US tax position, Indian tax position, asset mix, employment arrangement and any unique factors (PFIC investments, US business interests, planned moves). The deliverable is an engagement scoping memorandum with the proposed approach for both sides and the scoped fee.
The annual engagement runs through both the US filing cycle (preparation in February-March, filing by April 15 with extension to October 15 for taxpayers abroad) and the Indian filing cycle (preparation in May-July, filing by July 31 for individuals without international transactions or October 31 for those with). The coordination between the two cycles is built into the engagement calendar.
Multi-year engagements include the annual residency assessment, the foreign assets worksheet refresh, the FBAR and Form 8938 reconciliation and the year-end planning conversation. Most US expat clients run multi-year engagements; the year-on-year continuity materially reduces compliance risk and simplifies any future IRS scrutiny.
Director, CA Jashwanth Pasupuleti, leads the partner-level engagement. US filings are signed by US Enrolled Agents on our team. Indian filings are signed by qualified CAs on our team. The cross-border coordination runs inside the engagement rather than across separate firms.
How US Expats in India Should Set Up Their Annual Tax Cycle
For a US expat in India running multi-year US and Indian compliance, the annual cycle should be structured rather than reactive. The structure below produces predictable filings on predictable timelines and reduces the year-end pressure that catches many expats off-guard.
Q1 (January-March): document collection for both US and Indian returns. US W-2 and 1099 receipt period for any US-source income; Indian Form 16 for Indian-source salary; brokerage 1099-B and 1099-DIV from US brokerage accounts; Indian bank interest summaries; rental income statements for any Indian property; capital gains supporting documentation.
Q2 (April-June): US filing preparation. Form 1040 with FEIE, FTC, FBAR, Form 8938 as applicable. Filing by April 15 (automatic extension to October 15 for taxpayers abroad). Indian return preparation begins after the Indian financial year close on March 31.
Q3 (July-September): Indian filing. ITR-2 (or ITR-3) with all schedules. Schedule FA for RNOR and resident taxpayers. Indian filing deadline July 31 (extended to October 31 for international transactions).
Q4 (October-December): year-end planning conversation. Residency review for the next year (day count tracking, deemed residency conditions). Foreign tax credit utilisation planning. Estate planning considerations. Investment income strategies. December is the right month for the conversation because the Indian financial year still has three months left and the US tax year is closing.
Throughout the year: tax residency certificates renewed as needed; quarterly advance tax in India where applicable; US estimated tax payments quarterly where applicable; IRS and CBDT correspondence handled as it arrives.
Frequently Asked Questions
I am a US citizen who has lived in India for 10 years and never filed US tax returns. What do I do? The Streamlined Foreign Offshore Procedures are the standard route back into compliance. The procedure requires the prior three years of delinquent tax returns and the prior six years of delinquent FBARs with a non-willful certification. No penalties apply if the non-willful certification holds. We have run this engagement many times for US expats in India.
Can I claim FEIE if I am self-employed in India? Yes. FEIE applies to earned income whether received as salary or self-employment income. Self-employment income is computed under Schedule C with the FEIE applied to the net earnings.
What happens to my US Social Security when I live in India? US Social Security tax continues to apply to US-source earnings. India and the US do not have a totalization agreement, so US Social Security tax on US-source earnings is not credited against Indian social security contributions. Self-employed US citizens in India pay self-employment tax (Social Security plus Medicare) on net self-employment earnings unless an exemption applies.
What about my US-based investments while I live in India? US-based investments continue to generate US tax obligations on the income. Indian residency may or may not extend Indian tax to that income depending on the residency status. Investment income coordination across both sides is a recurring engagement topic.Do you handle US PFIC reporting on Indian mutual funds? Yes. Indian mutual funds are typically treated as Passive Foreign Investment Companies (PFICs) for US tax purposes, with the resulting Form 8621 reporting requirement and the punitive default tax treatment that the PFIC rules impose. We prepare Form 8621 with the QEF or mark-to-market election analysis where applicable.