For many Americans, moving to India is a once-in-a-lifetime opportunity to experience a unique culture so different from their own yet so rich in history and accomplishments.  However, even after leaving the US, citizens still have tax obligations to it.

In this article, we’ll discuss the US expat tax policy for those living in India.  It’s also useful for expats to consult a tax expert, especially when filing taxes from India for the first time.

Understanding US Tax Obligations While Living in India

The United States is one of the few countries that taxes its citizens on income earned globally.  This means that if you’re an American living in India, the income you earn there still needs to be taxed in the US.

Indian markets and the economy are as integrated into global finance as they can be.  For instance, using crypto exchanges in India gives investors a chance to be part of the global crypto rush, as they would be in the US.  The profits made this way are still taxable by the IRS, as they are back home.

American expats in India must file a US tax return each year using Form 1040.  If an American’s Indian bank account has more than $10,000 in total, you must file the Foreign Bank Account Report (FBAR).  Those who have larger investments also need to file Form 8938 under the Foreign Account Tax Compliance Act (FATCA).  Expats also have a 2-month extension to file their taxes.

Indian Tax System Basics for US Expats

India determines the tax obligations based on the residency status.  Those who stay in India for 182 days or more need to pay taxes as tax residents.  Residents are taxed on global income, while non-residents pay tax only on income earned in India.

India has different tax brackets based on your income; the rates range from 5 percent to 30 percent.  Taxable income sources include: salaries, business profits, rental income, and capital gains.  For individuals, the tax filing deadline is July 31^st.

There are also deductions under Section 80C.  These include: retirement contributions, insurance premiums, and tuition fees.  Within these, there are many complexities, and taxpayers should consult an expert, especially when filing for the first time.  The tax system is fairly digitalized and easy to manage, once you understand your rights.

Avoiding Double Taxation: The U.S.-India Tax Treaty

The Double Tax Avoidance Agreement (DTAA) between the United States and India was established to prevent the same income from being taxed in both countries.  Based on the Foreign Tax Credit (FTC), American expats can claim a tax credit on the amounts they’ve already paid in India.

The Foreign Earned Income Exclusion (FEIE) allows an expat to exclude a certain amount of foreign income from taxation.  At this point, the maximum amount is set at $120,000 in 2025.  It’s available to those who spend at least 330 days abroad.

Reporting Foreign Accounts and Assets

American expats in India are also obligated to report foreign accounts and assets through FBAR (FinCEN Form 114).  It applies to all accounts with more than $10.000 at any point during the year, and it covers both savings and checking accounts.

FATCA requires Indian financial institutions to share this information with the IRS.  Therefore, when an expat opens an account in India, they’ll be asked to provide the US Taxpayer Identification Number (TIN).  Make sure to keep detailed records of all your accounts and transfers made to them.  This is easy enough with online banking.

Practical Tips for Managing Taxes in Both Countries

It’s best to use the services of an expert when moving abroad.  A tax attorney, especially one who specializes in expat affairs, can help a lot and, in the long run, pay for themselves by providing useful advice.

There are online tools, apps, and software that expats use to keep track of their obligations towards both sides.  These are usually subscription-based and also end up being worth the extra charge.  Other than that, standard rules about keeping track of invoices, expenses, and payments always make things easier in the long run.

To Sum Up

Expats living in India still need to pay taxes in the US, and they are obligated to pay them in India as well, as long as they spend a certain amount of time in the country.  There’s also an agreement between the two countries that prevents double taxation.

The Indian tax system also has income brackets, with rates that rise progressively.  Those who spend most of the year in India also get a tax break on their American taxes up to a certain amount.  Taxpayers are obligated to keep track of their finances and collect the data needed for taxation on both sides.