u.s. expat tax guide – india
Do US citizens living in India still have to file a US tax return?
Yes, they do. If you are an American citizen or Green Card holder living in India, you are still required to file a US tax return.
Living outside of the United States does not remove your obligation to report your worldwide income to the Internal Revenue Service (IRS).
Why do US citizens and Green Card holders need to file taxes while living abroad?
The US tax system is based on citizenship, not residency. This means that if you hold a US passport or have a Green Card, you must file a US tax return, even if you are living and working outside the US.
You are required to report all your worldwide income, which includes any income you earn in India, whether from employment, self-employment, or investments.
Who exactly needs to file a US tax return?
The US tax system is based on citizenship, not residency. This means that if you hold a US passport or have a Green Card, you must file a US tax return, even if you are living and working outside the US.
You are required to report all your worldwide income, which includes any income you earn in India, whether from employment, self-employment, or investments.
If you are a US citizen or a Green Card holder, you need to file a US tax return if your income exceeds certain thresholds.
The filing thresholds for the 2024 tax year are as follows:
| Filing Status | Age Under 65 | Age 65 or Older |
| Single | US$14,600 | US$16,750 |
| Married Filing Jointly | US$29,200 (both under 65) | US$30,800 (one over 65) / US$32,300 (both over 65) |
| Married Filing Separately | US$5 | US$5 |
| Head of Household | US$21,200 | US$23,400 |
This rule applies regardless of where you live. If you moved back to India for work, or if you are self-employed there, you must file a US tax return and report all of your income from both US and Indian sources.
Do Green Card holders in India need to file FBAR?
Yes, Green Card holders in India may also need to file an FBAR (Foreign Bank Account Report) if they meet the filing threshold.
The FBAR requirement applies to anyone with foreign financial accounts totaling more than US$10,000 at any point during the year. This includes savings accounts, investment accounts, and retirement accounts held in India.
For example, if you have a bank account in India and the combined value of all your foreign accounts exceeds US$10,000, you need to file an FBAR. This requirement is separate from your US tax return, and failing to file an FBAR can lead to significant penalties.
What types of accounts need to be reported on the FBAR?
The FBAR filing requirement covers all foreign financial accounts, including:
- Savings accounts: Any savings accounts you hold in Indian banks must be reported.
- Investment accounts: If you have investments in Indian mutual funds or stocks, these accounts must be reported.
- Retirement accounts: Any retirement accounts you hold in India, such as the Public Provident Fund (PPF), also need to be reported.
What happens if I don’t file a US tax return?
Failing to file a US tax return while living in India can result in serious penalties. The IRS may impose late filing fees, interest charges, and even additional penalties for failing to report income.
Moreover, if you fail to file an FBAR when required, you could face penalties of up to US$10,000 per violation, or even higher if the failure is deemed willful.
Do you need to report Indian bank accounts on Form 8938?
In addition to FBAR, you may also need to file Form 8938 (Statement of Specified Foreign Financial Assets) if your foreign financial assets exceed certain thresholds. For US expats living in India, the filing threshold for Form 8938 is:
- US$200,000 on the last day of the tax year, or
- US$300,000 at any point during the tax year for those filing as single.
For married individuals filing jointly and living abroad:
- US$400,000 on the last day of the tax year, or
- US$600,000 at any point during the tax year.
How can you stay compliant with US tax laws while living in India?
Staying compliant with US tax laws while living in India can be challenging due to the various reporting requirements and the potential for double taxation. Here are some steps to help you stay on track:
- File your US tax return every year: Even if you owe no tax, you still need to file.
- File FBAR if required: Report all foreign bank accounts if their combined value exceeds US$10,000.
- Consider Form 8938: If you have significant foreign assets, make sure you include Form 8938 with your tax return.
- Work with a tax professional: A tax professional who understands both US and Indian tax laws can help ensure that you are compliant and can help minimize your tax burden.
What should you do if you haven’t filed US taxes in a while?
If you have not been filing your US tax returns while living in India, it is important to take action as soon as possible. The IRS Streamlined Filing Compliance Procedures allow eligible taxpayers to catch up on their taxes without facing penalties.
This program is specifically designed for US citizens and green card holders living abroad who were unaware of their tax filing obligations.
The key to using this program is to show that your failure to file was not intentional. If accepted, you can file your last three years of tax returns and up to six years of FBARs to become compliant.
