U.S. TAX GUIDE IN INDIA
What filing statuses are available for US expats in India, and what should they report for 2025?
The IRS provides four filing statuses that determine your US tax obligations: Single, Married Filing Jointly, Married Filing Separately, and Head of Household. These categories define the income limits that determine whether you need to submit a tax return.
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For the 2025 tax year, the filing thresholds are:
Filing Status | Age Under 65 | Age 65 or Older |
Single | US$15,000 | US$17,500 |
Married Filing Jointly | US$30,000 | US$31,500 (one over 65) / US$33,000 (both over 65) |
Married Filing Separately | US$5 | US$5 |
Head of Household | US$22,500 | US$24,000 |
These limits are in place regardless of where you live. Therefore, if your income surpasses these thresholds while you are living in India, you must file a US tax return, including all earnings from both US and Indian sources.
What kinds of income do US expats in India need to report?
If your income meets or exceeds the filing threshold, you must report all global income to the IRS. This includes income from India or any other country.
Here’s what you need to report:
- Wages or Salary: This includes all earnings from employment, whether from an Indian or US employer. Make sure to convert earnings in Indian Rupees to US Dollars for IRS reporting.
- Self-Employment Income: Income earned through freelance work or running a business in India must be reported as if it were earned in the US. You may also be responsible for paying US self-employment tax, regardless of equivalent Indian taxes paid.
- Interest and Dividends: Any interest from savings accounts, fixed deposits, or dividends from investments, whether earned in Indian or US financial institutions, must be reported.
- Capital Gains: Any gains made from selling assets like stocks, bonds, or property need to be reported. This is applicable to assets located in India, the US, or other countries.
- Rental Income: Rental earnings from properties you own must be included, whether the property is in India, the US, or elsewhere.
- Pension and Retirement Distributions: Any withdrawals from retirement accounts like India’s Employees’ Provident Fund (EPF) or US retirement accounts should be reported.
- Social Security Benefits: If you receive US Social Security benefits, you are required to report these. Depending on your total income, some of this may not be taxable.
Are Green Card holders in India obligated to file US taxes?
Yes, Green Card holders residing in India must adhere to the same filing requirements as US citizens. They need to report all worldwide income to the IRS.
Additionally, Green Card holders must file an FBAR (Foreign Bank Account Report) if the total value of foreign accounts exceeds US$10,000 at any point during the year. This includes all savings, checking, and investment accounts.
Should US expats with low income still report their foreign accounts?
Absolutely.
Even if your income falls below the threshold that requires you to file a tax return, you may still need to file an FBAR if your foreign account balances exceed US$10,000 at any time during the year.
Furthermore, if your foreign assets are substantial, you might also need to file Form 8938 under FATCA regulations. These requirements exist regardless of your income level.
What should US expats do if they have missed filing their US taxes or FBAR?
If you discover that you have missed filing an FBAR or Form 8938, it’s best to act promptly. The IRS offers options for late filers, especially for those whose failure to file was not intentional.
The Streamlined Filing Compliance Procedures provide an avenue to catch up on missed filings without penalties, provided that you certify that the non-compliance was not deliberate.
If you are unsure about the process, it is advisable to consult with a tax professional. A qualified expert can guide you through addressing missed filings and prepare the necessary forms and supporting documentation.
What are the advantages of effective tax planning for US expats in India?
Tax planning can make a significant difference for US expats living in India. Through proper planning, you can minimize your tax liability and ensure compliance with US and Indian tax laws.
Effective tax planning involves:
- Foreign Earned Income Exclusion (FEIE): This allows you to exclude up to US$130,000 of foreign income for the 2025 tax year, provided you meet the physical presence or bona fide residence tests.
- Foreign Tax Credit (FTC): The FTC prevents you from paying tax twice on the same income by giving you credit for the taxes paid in India against your US tax liability.
- Utilizing Tax Treaties: The US and India have agreements that can help avoid double taxation in certain scenarios. Understanding these treaties can be critical in optimizing your tax liability.
Should US expats take proactive measures for future filings?
Absolutely. Setting reminders for tax deadlines, keeping all your documents organized, and having a dedicated account for estimated tax payments are a few steps to help you stay compliant.
Additionally, using software tailored for expats or consulting with a tax professional annually can keep you on top of any regulatory changes.
