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India to USA Tax Guide 2026: H-1B Filing, India-US DTA, NRI Status & EPF Rules

Quick Answer: Indians moving to the USA become US tax residents once they pass the Substantial Presence Test (183 days or more in the US in the current year, counting partial days in prior years) or receive a Green Card. US tax residents pay US income tax on worldwide income — including Indian income, Indian rental property, and Indian investments. India taxes non-residents (NRIs) only on India-sourced income. The India-US Tax Treaty (1989) reduces withholding on dividends (15/25%) and interest (15%), provides pension protections, and offers student/apprentice income exemptions. EPF and PPF withdrawals have specific tax treatment. Indian bank accounts above $10,000 must be reported on FBAR.
By Daniel, founder of CountryTaxCalc.com

Last Updated: April 2026

Key Facts

Becoming a US Tax Resident
The US has two paths to tax residency: (1) Green Card test: holding a Green Card makes you a US resident alien for tax purposes from the date you are admitted as a lawful permanent resident; (2) Substantial Presence Test (SPT): you are a US resident for tax purposes if you are present in the US at least 31 days in the current year AND at least 183 days counting: all days in the current year + 1/3 of days in the prior year + 1/6 of days the year before that. Most H-1B visa holders become US tax residents in their first or second year. In the year you become a US tax resident, you file a dual-status return (non-resident for part of year, resident for the rest).
NRI Status in India
India's Income Tax Act determines NRI status based on physical presence in India. You are an NRI for Indian tax purposes if you have been in India: less than 182 days in the financial year (April 1–March 31); OR less than 60 days in the current year AND less than 365 days in the preceding 4 years. As an NRI, India taxes only your India-sourced income: salary for services rendered in India, income from Indian property, interest from Indian banks (at a special NRI rate of 30% or DTA-reduced rate), dividends from Indian companies, and capital gains on Indian assets. India does NOT tax NRIs on foreign income (US salary, US investments, etc.).
India-US Tax Treaty (Double Taxation Avoidance Agreement, 1989)
The India-US DTAA provides: (1) Dividends: withholding tax 15% (substantial holding) or 25% (portfolio); (2) Interest: withholding 15% (India-to-US or US-to-India interest); (3) Royalties and fees for technical services: 10–15% depending on type; (4) Pensions: US Social Security paid to India residents — taxable only in India; (5) Article 20 student/apprentice income: exempts income of Indian students in the US from US tax for up to 5 years; (6) Article 21 professors/researchers: exemption up to 2 years. The treaty does not eliminate taxes — it reduces withholding rates and provides specific exemptions. You must claim treaty benefits by attaching a statement to your tax return.
EPF (Employees' Provident Fund) — The Key Issue
EPF is India's mandatory employer-employee retirement contribution scheme: 12% of basic salary from both employer and employee, accumulating with interest (currently ~8.15%/year tax-free in India). For Indians moving to USA: (1) Can you withdraw EPF after leaving India? Yes — after 2 months of leaving Indian employment (reduced from 1 year as of 2016). (2) US tax on EPF withdrawal: the IRS has inconsistent guidance. Some advisors argue EPF is a foreign pension excluded from US tax; others argue it is ordinary income taxable on withdrawal. The US-India treaty's pension article is ambiguous on EPF. (3) Ongoing EPF accumulation: the IRS may treat annual EPF contributions and interest as taxable income during the accumulation period under PFIC or foreign trust rules, depending on the fund's structure.
PPF (Public Provident Fund) — Similar Issues
PPF is a voluntary Indian government savings scheme with a 15-year lock-in, earning approximately 7.1%/year tax-free in India. PPF withdrawals: partially accessible after year 7. US tax treatment of PPF is similarly unresolved — advisors generally recommend reporting PPF account balance on FBAR and Form 8938 and reporting annual interest income as ordinary income on the US return (even though it is tax-deferred in India).
India-US Social Security Totalization Agreement
India and the US signed a Social Security Totalization Agreement effective October 2009. The agreement prevents dual social security contributions for workers sent from one country to the other: a US company sending an employee to India: the employee pays only US Social Security (FICA) for up to 5 years; an Indian company sending an employee to the US: the employee pays only Indian PF/ESI contributions for up to 5 years. The agreement also allows combining contribution periods for benefit eligibility purposes.

India sends more H-1B visa holders to the United States than any other country — hundreds of thousands of Indian professionals work in US technology, healthcare, finance, and research industries. Moving from India to the US creates a complex dual-tax situation: the US imposes income tax on worldwide income once you become a tax resident, while India continues to tax your India-sourced income as a non-resident Indian (NRI). The India-US Tax Treaty (1989 Convention) provides relief in some areas but leaves many situations — particularly around Indian provident funds and Indian investments — without clear guidance. This guide covers the complete tax picture for Indians moving to the USA.

FBAR, FATCA, and Indian Financial Accounts

US tax residents with Indian financial accounts face significant reporting obligations — violations can result in penalties far exceeding the tax owed.

FBAR — FinCEN Report 114

Any US person (resident alien or US citizen) with foreign financial accounts totalling more than $10,000 at any point during the calendar year must file FBAR. This includes: Indian savings accounts, NRE (Non-Resident External) accounts, NRO (Non-Resident Ordinary) accounts, Indian brokerage accounts (Demat accounts), Indian PPF/EPF accounts if accessible. FBAR is filed online with FinCEN (not the IRS) by April 15, with automatic extension to October 15. Penalties for non-wilful failure to file: up to $10,000 per account per year. Willful failure: up to $100,000 or 50% of account balance per year.

Form 8938 — FATCA Reporting

Form 8938 (Statement of Specified Foreign Financial Assets) is filed with your Form 1040 for US tax residents with foreign financial assets above: $50,000 on December 31 or $75,000 at any point during the year (single filer); $100,000/$150,000 (married filing jointly). Indian assets that must be reported on Form 8938 include: bank accounts, investment accounts, Indian mutual funds, Indian insurance policies (endowment, ULIP), Indian PPF/EPF accounts. Indian real property is NOT reported on Form 8938 (real property is not a 'financial account') — but income from Indian real property must be reported on Form 1040.

Indian Demat Account and Stock Holdings

An Indian Demat account holding Indian equities: the account itself is reportable on FBAR if above $10,000. Dividends from Indian companies: US taxable income (report on Schedule B); DTA reduces Indian withholding to 15-25% and a Foreign Tax Credit offsets the US tax. Capital gains from selling Indian stocks: taxable in India (Short-Term Capital Gains 15% for equity/mutual funds, Long-Term 10% above ₹1L) AND reportable as US capital gains. Foreign Tax Credit applies. Mutual funds (especially Indian equity mutual funds): may be classified as PFICs (Passive Foreign Investment Companies) — subject to punitive PFIC taxation under US law. Specialist advice required.

Indian Rental Property and Real Estate

Many Indians in the US own rental property in India — either inherited or purchased. This creates ongoing Indian and US tax obligations.

Indian Rental Income for NRIs

NRIs earn rental income from Indian property. In India: rental income is taxed under 'Income from House Property' after a 30% standard deduction on net annual value. Tenants are required to deduct TDS (Tax Deducted at Source) at 31.2% on rent paid to NRIs. NRIs must file an Indian income tax return to claim refunds if TDS exceeds actual Indian tax liability.

US Reporting of Indian Rental Income

US tax residents must report Indian rental income on Schedule E (Form 1040). Deductible expenses include Indian property taxes, mortgage interest, repairs, depreciation (computed on US depreciation rules — 40-year life for foreign residential property vs 27.5 years for US property). Indian taxes paid on rental income generate a Foreign Tax Credit on Form 1116. Net rental income after expenses and the FTC offset is included in US taxable income.

Selling Indian Property from the US

When an NRI sells Indian property: India imposes Long-Term Capital Gains Tax of 20% with indexation benefit (if held >2 years); Short-Term Capital Gains at the individual's slab rate if held <2 years. TDS on property sale by NRI: buyer deducts 20% TDS. The seller can apply for a lower TDS certificate from the Indian income tax authority. US tax on the same sale: the capital gain (US basis may differ from Indian indexed basis) is included in US gross income; the Indian LTCGT paid generates a Foreign Tax Credit. Indian indexation adjustments are not recognised by the US — this can cause residual double taxation.

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Frequently Asked Questions

Q: Do I still need to file Indian income tax returns after moving to the USA?

Yes, if you have Indian-sourced income above the basic exemption limit (₹2.5 lakh for most NRIs in FY2025-26; ₹3 lakh if age 60–80; ₹5 lakh if age 80+). Income that requires Indian filing includes: rental income from Indian property, Indian salary for services in India, interest income from NRO accounts (NRE interest is exempt in India for NRIs), dividends above ₹5,000 per company, and capital gains from Indian assets. NRIs can file their Indian income tax return online via the Income Tax e-Filing Portal. Deadline: July 31 for non-audit NRIs; October 31 for those requiring audit.

Q: What is the difference between an NRE and NRO account in India?

NRE (Non-Resident External) account: holds foreign currency converted to INR; principal and interest fully repatriable to the US; interest income is tax-free in India for NRIs. NRO (Non-Resident Ordinary) account: holds Indian rupees; only current income (not principal) freely repatriable after paying Indian taxes; interest income taxable in India at 30%. For US tax purposes: both NRE and NRO account balances must be reported on FBAR if total exceeds $10,000. Interest income from both accounts is US taxable income — the NRE interest exemption in India does not affect US tax obligations.

Q: Does the India-US tax treaty protect H-1B workers from double Social Security taxation?

Yes — the India-US Totalization Agreement (2009) prevents dual Social Security contributions for workers on temporary assignment. For an Indian company employee on an L-1 or deputation to the US: contributions to Indian PF/ESI during the first 5 years of US assignment are credited instead of US FICA. The worker presents a Certificate of Coverage (Form USA/IND-1 obtained from the US SSA) to the employer to demonstrate exemption from US FICA. For H-1B workers hired directly by US employers (not on Indian company payroll): generally subject to US FICA from day one. The totalization agreement applies primarily to intra-company secondments.

Q: I have Indian mutual funds (MF). How are they taxed in the USA?

Indian mutual funds are almost certainly classified as Passive Foreign Investment Companies (PFICs) under US tax law — because they are foreign entities (incorporated in India) whose primary assets generate passive income (dividends, interest, capital gains). PFICs are subject to one of three US tax regimes: (1) Default regime: gains and distributions taxed at ordinary income rates plus interest charges (extremely punitive); (2) QEF election: mark-to-market annual income inclusion with capital gain rates; (3) Mark-to-market election: annual gain/loss included as ordinary income. Practically, US tax residents in India are strongly advised by specialists to liquidate Indian mutual fund holdings before establishing US residency, or to avoid acquiring them after becoming US residents. Indian Demat account individual stock holdings do not carry the same PFIC classification.

Q: Can I contribute to India's National Pension System (NPS) as an NRI?

NRIs can contribute to the NPS — PRAN (Permanent Retirement Account Number) holders can continue contributions. Indian tax benefit: NPS contributions receive Section 80C deduction in India (up to ₹1.5 lakh) — however, NRIs filing Indian returns may use this deduction. US tax treatment of NPS: similar unresolved issues as EPF/PPF. Contributions are made from post-US-tax income (no US deduction); the earnings accumulate; and the withdrawal tax treatment is uncertain. US practitioners generally recommend reporting NPS contributions and investment income annually on US returns (Form 1040) rather than deferring the US tax until withdrawal.

Q: I received a Form DTAA (Tax Residency Certificate) from India. What do I do with it?

The Tax Residency Certificate (Form 10F) from India certifies your tax residency status in India to claim DTA benefits. In India, you present your US Tax Residency Certificate (Form 6166, obtained from the IRS) to Indian entities to claim reduced withholding rates under the India-US DTA. Conversely, an Indian TRC (Form 10F) is used when claiming Indian tax treaty benefits in other countries — not typically needed for US filings. To claim treaty benefits on your US return: attach a disclosure statement identifying the treaty article, country, and benefit claimed. No Indian document is submitted to the IRS, but keep the Indian TRC in your records as supporting documentation.

Disclaimer: This guide provides general tax information for educational purposes only. India-US tax treatment of EPF, PPF, NPS and Indian mutual funds involves unresolved areas of tax law. Indian NRI tax rules are subject to annual budget changes. This is not tax advice. Consult a CPA with US expat and India-US cross-border tax expertise for your specific situation.

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