Moving from the USA to India presents unique challenges, especially when it comes to filing taxes. As a U.S. citizen or green card holder residing in India, you are still required to file your U.S. taxes annually, regardless of your location. This blog post will guide you through the essential steps and considerations for filing taxes as an expatriate in India.

Understanding Your Tax Obligations

U.S. Tax Filing Requirements

If you are a U.S. citizen or green card holder, you must file a U.S. tax return each year if your income exceeds certain thresholds. For the 2024 tax year, these thresholds are:

  • Single: $14,600

  • Married Filing Jointly: $29,200

  • Married Filing Separately: $5

  • Head of Household: $21,900

  • Qualifying Widow(er): $29,200

  • Self-Employed: $400

Even if you have not lived in the U.S. for years, your tax obligations remain based on your citizenship status1.

Additional Reporting Requirements

As an expatriate, you may also have additional reporting requirements:

  • Foreign Bank Account Report (FBAR): Required if you have more than $10,000 in foreign bank accounts at any time during the year.

  • Foreign Account Tax Compliance Act (FATCA): You must report foreign accounts and assets if their combined value exceeds $200,000 for single filers.

  • Passive Foreign Investment Company (PFIC): If you own Indian mutual funds or certain life insurance policies, you may need to file Form 86211.

Navigating Indian Tax Laws

Residential Status and Tax Implications

Your residential status in India affects your tax liabilities. If you stay in India for more than 182 days in a financial year, you will be classified as a resident for tax purposes. This classification can lead to taxation on your global income if deemed an “Ordinary Resident.” Conversely, if classified as a “Not Ordinary Resident,” only your Indian-sourced income will be taxable3.

Double Taxation Avoidance Agreement (DTAA)

To mitigate the risk of being taxed twice on the same income, the U.S. and India have a Double Taxation Avoidance Agreement (DTAA). This agreement allows taxpayers to claim tax credits or exemptions on income earned in one country against taxes owed in the other4.

For example:

  • If you earn salary income in the U.S., it is also taxable in India; however, under DTAA provisions, you may receive relief from double taxation.

Filing Your Taxes from India

Deadlines and Extensions

The standard deadline for filing U.S. taxes is April 15th each year. However, expatriates can automatically extend this deadline to June 15th by filing Form 4868. If further extension is needed, a request must be made by June 15th to extend until October 15th12.

Choosing the Right Forms

For most expatriates, Form 1040 is required for reporting income. If you are classified as a non-resident alien with U.S.-sourced income only, Form 1040-NR may be applicable2.

Utilizing Professional Services

Given the complexities of navigating both U.S. and Indian tax laws, many expatriates opt to use professional tax services that specialize in expat filings. These services can help ensure compliance with both countries’ regulations and maximize potential deductions or credits available under DTAA56.

Conclusion

Filing taxes after moving from the USA to India can be daunting due to differing tax obligations and regulations. Understanding your responsibilities as a U.S. citizen living abroad is crucial for maintaining compliance and avoiding penalties. By being aware of filing deadlines, required forms, and utilizing professional assistance when necessary, you can navigate this process smoothly and focus on enjoying your new life in India.