Tax guide for Americans in India

Living in India as an American comes with a few extra financial details to keep in mind. Even if your income is mostly from India, you’ll still have some filing requirements back in the US in India, how much you need to report depends on how long you stay and where your money comes from. It might sound tricky at first, but with a little guidance, it’s easier than you think.

This guide is here to help you understand the basics of Indian taxes for American expats. We’ll walk you through key topics like tax residency, income reporting, and important deadlines. You’ll also learn about tools like tax treaties that can reduce the burden of paying taxes in both countries. With the right information, managing your taxes doesn’t have to be overwhelming.

Overview of taxation in India for expats

Who has to pay taxes in India?

The obligation to pay taxes in India is primarily based on two factors: your tax residency status and the source of your income. The Indian tax system classifies individuals as:

• Residents
• Non-Residents (NRI)
• Resident but Not Ordinarily Residents (RNOR)

Here’s how it works:

• Residents of India are taxed on their global income, including income earned outside India.

• Non-residents are taxed only on income that is earned or accrued in India.
• RNORs are taxed on income earned in India and only certain types of foreign income (e.g., from a business controlled in India).

So, if you're a US citizen living in India for more than 6 months, there's a high chance you’ll be considered a resident under Indian law and subject to Indian taxation on worldwide income. However, NRI status in India can apply if your stay is shorter or intermittent, and this significantly limits what income gets taxed.

How to determine tax residency

Your tax residency status in India decides how much tax you pay – and on what income. India’s tax rules use the number of days you spend in the country each financial year (April 1 to March 31) to figure this out.

There are four main categories:

• Resident
• Non-Resident
• Resident but Not Ordinarily Resident (RNOR)
• Deemed Resident

Let’s break these down.

India resident qualifications

You’re a resident if you:

• Spend 182 days or more in India during the financial year, or
• Spend 60 days or more in the current financial year and at least 365 days over the past 4 years.

If you meet either rule, India taxes your global income.

Non-Resident qualifications in India

If you don’t meet the above, you’re a Non-Resident Indian (NRI). That means you pay tax only on income:

• Received or earned in India, or
• Deemed to be earned in India

This includes salary, property income, or capital gains from Indian assets. Income earned outside India usually isn’t taxed.

RNOR and ROR qualifications

Resident but Not Ordinarily Resident (RNOR) is a special status for returnees or newcomers.

You qualify if:

• You’re a resident this year, but
• You were a non-resident in 9 out of the last 10 years, or
• You’ve spent 729 days or fewer in India over the past 7 years.

RNORs pay tax on Indian income and some foreign income (like business profits controlled from India).

If you don’t fit RNOR rules, you’re a Resident and Ordinarily Resident (ROR) – taxed on worldwide income like a regular resident.

Deemed resident qualifications

India created the Deemed Resident status to stop people from dodging tax by claiming no residency anywhere.

You’re a deemed resident if:

• You’re an Indian citizen,
• Your income (excluding foreign income) is over 15 lakh in the year, and
• You don’t pay tax in any other country.

Deemed residents get taxed like RNORs.

Types of taxes in India

India has many taxes at the central and state levels. But if you’re an expat, your biggest focus will be on income tax. India uses a progressive tax system; more you earn, the higher your tax rate.

Right now, there are two tax regimes you can choose from, each with its own rates and rules about deductions.

2025/26 income tax rate in India (APTR)

The new tax regime, also called the Annual Progressive Tax Rate (APTR), aims to simplify taxes. It has lower rates, but most deductions and exemptions don’t apply.

If you don’t have many deductions, this regime might be easier and cheaper.

Old tax regime

The old regime lets you claim many deductions, like investments under Section 80C, health insurance premiums, and house rent allowance.

If you have a lot of deductible expenses or investments, the old regime might save you more.

Surcharge

If you earn a lot, India adds a surcharge on top of your tax:

This means the effective tax rate can get quite high for top earners.

NOTE! Everyone pays a 4% health and education cess on their total tax and surcharge. This helps fund national health and education programs.

Moving to India or already living there?
You still need to file US taxes – we can help

Learn more

Filing a tax return in India

Filing your tax return is a must if you want to stay on the right side of Indian tax laws. Whether you’re a resident, an NRI, or a US citizen living in India, the process is mostly digital now, but knowing when and how to file is still important.

When to file a tax return

For most people, including expats and NRIs who earn taxable income in India, the tax return deadline is July 31st after the financial year ends (India’s financial year runs from April 1 to March 31).

Sometimes, the government extends this deadline, but it’s safest to stick to July 31. If you need a tax audit (usually for business or professional income over certain limits), the deadline moves to October 31st.

Even if you earn below the taxable limit, filing can be helpful, like if you want to claim a refund or carry losses forward.

How to file a tax return

India’s tax department runs an online portal. You can file yourself there or hire a chartered accountant to help.

The steps are:

1. Register or log in to the portal.
2. Choose the right tax form for your income and residency (usually ITR-1 or ITR-2).
3. Report all income, including foreign income, if you’re a resident.
4. Claim deductions if you’re using the old tax regime.
5. Submit and verify your return online using Aadhaar OTP, bank account, or digital signature.

Penalties for late or incorrect filing

Miss the deadline or file the wrong info? Here’s what can happen:

• A late fee from 1,000 up to 5,000, depending on your income (Section 234F).
• Interest on unpaid taxes (Section 234A).
• Fines or even prosecution if you underreport income.

Plus, not filing on time can block you from using tax treaty benefits, carrying forward losses, or getting tax clearance for big transactions like selling property.

Other taxes in India

Besides income tax, there are several other taxes that might affect you as an expat, especially if you run a business, sell assets, or make big purchases in India. You might not face all of these, but it’s good to know what’s out there.

Goods and Services Tax (GST)

India introduced the Goods and Services Tax (GST) in 2017. It replaced a mix of state and central indirect taxes.

Rates vary 5%, 12%, 18%, or 28%, depending on the goods or services.
Who pays? The final consumer, but businesses registered under GST, must collect and send it to the government.

If you run a business or freelance in India, you might need to register for GST and file regular returns.

Corporation tax

If you operate a business in India like a private limited company or a branch office – you pay corporation tax on your profits.

• Domestic companies pay 25% tax if turnover is below 400 crore; otherwise, 30%.
• Foreign companies face a higher tax rate of 40%.

This matters if you’ve set up a company or work through a foreign entity in India.

Buyback of shares

When Indian companies buy back their shares, they pay a 20% tax on the amount distributed. This tax is paid by the company itself.

Shareholders don’t have to pay capital gains tax on these buybacks because the company already took care of it.

Capital gains taxes

When you sell capital assets – like property, shares, or mutual funds – you’ll pay capital gains tax. The rate depends on how long you held the asset:

• Short-term capital gains (STCG):
  • 15% tax on listed securities if held less than 12 months.
  • For other assets held less than 36 months, taxed at normal income tax rates.
• Long-term capital gains (LTCG):
  • 10% tax on gains above INR 100,000 for listed assets held longer than 12 months.
  • 20% with indexation for other assets held longer than 36 months.

Wealth tax in India

India got rid of its wealth tax back in 2015. Before that, anyone with net wealth over 30 lakh had to pay it.

Inheritance tax in India

India does not tax inheritance or estates. So, when assets pass to heirs, there’s no tax at that moment.

But watch out for these two things:

• Income generated from inherited assets, like rent or profits from selling property, is taxable.
• If you’re a US citizen, US estate and gift tax rules could still apply to your global assets, including those in India.

India property tax

Property tax in India is charged by local governments. It depends on things like:

• Size and location of the property
• How it’s used
• Type of construction

Each city has its own rates – Mumbai, Delhi, Bangalore, for example. You pay property tax annually, and you’ll usually need proof of payment to get utilities or sell the property.

Social security in India

India’s social security system mainly includes the Employees' Provident Fund (EPF) and the Employees' State Insurance (ESI) schemes.

Most Indian employees must contribute to these, and some expats working in India may also have to chip in.

If you’re a US citizen still on a US payroll or covered by US Social Security, you might be exempt from Indian contributions thanks to the US-India Totalization Agreement (we’ll cover that later).

As an expat, it’s important to check if you’re considered an International Worker under Indian EPF rules and see if any exemptions apply through bilateral agreements.

FREE

Moving to India for work or retirement?

Plan your US taxes – start with a free consultation

Schedule my free call

The tax treaty between the US and India

To help avoid double taxation, the United States and India have signed a comprehensive tax treaty. This treaty allocates taxing rights between the two countries and provides mechanisms for tax relief, ensuring that income is not taxed twice.

Key features of the US-India tax treaty:

• Relief from double taxation: The treaty allows taxpayers to claim a Foreign Tax Credit (FTC) on US returns for taxes paid in India on the same income.
• Defined source rules: The treaty determines which country has the right to tax specific types of income, such as pensions, dividends, interest, royalties, and capital gains.
• Permanent establishment clause: US expats doing business in India are not taxed on business profits unless they have a permanent establishment in India.
• Student & researcher relief: Under the India tax treaty with the US, certain income earned by students, teachers, and researchers may be exempt from tax in India for a limited time.

This treaty is especially beneficial for US citizens working in India, allowing them to reduce their overall tax liability legally.

Totalization agreement between the US and India

The US and India also have a Totalization Agreement to avoid double social security taxes.

What it does:

• Stops you from paying into both the US Social Security and India’s EPF system at the same time when working abroad temporarily.

• Helps you combine your work periods in both countries to qualify for benefits.

Who does this affect?

• US employees sent to India for up to 5 years can stay on the US social security and skip India’s EPF contributions.

• Indian workers in the U.S. get similar benefits.

India tax forms for US expats

If you're an American earning income or investing in India, understanding which Indian tax forms to file is crucial. The Income Tax Department of India provides multiple Income Tax Return (ITR) forms based on income type and residency status.

Common forms for expats:

• ITR-1 (Sahaj): For residents with salary, one house property, and income up to 50 lakh (not for NRIs or foreign income earners).
• ITR-2: Used by individuals and HUFs with income from multiple sources, including foreign income, capital gains, and owning property abroad. Most suitable for US expats.
• ITR-3: For individuals earning business or professional income.
• ITR-4 (Sugam): For presumptive income schemes (usually not for expats).

Expats must file online via the Indian e-filing portal, and depending on your case, digital signatures or Aadhaar-based verification may be required. Filing deadlines are typically July 31st unless extended.

US tax forms and filing requirements for Americans in India

Even if you live in India full-time, as a US citizen or Green Card holder, you must file US tax returns every year. This includes reporting your worldwide income – even if you’ve already paid tax in India.

Key forms you’ll need:

• Form 1040: Your main US income tax return.
• Form 2555: To claim the Foreign Earned Income Exclusion (FEIE).
• Form 1116: To claim the Foreign Tax Credit (FTC) for taxes paid in India.
• FBAR (FinCEN Form 114): Required if you have foreign bank accounts totaling over $10,000.
• Form 8938 (FATCA): For reporting foreign financial assets above IRS limits.

Important deadlines:

• April 15: Standard US tax deadline (taxes due).
• June 15: Automatic filing extension for expats.
• October 15: Final extension deadline with a request (Form 4868).

Missing deadlines or forms can lead to penalties and the loss of valuable treaty benefits. That’s why timely, accurate filing matters.

American in India?
File your US return with peace of mind – get professional help

Get started

Stay compliant with US expat taxes in India

Handling taxes in both the US and India isn’t just about avoiding fines – it’s about peace of mind and securing your financial future.

Here’s what really helps:

• Know your residency status in both countries. This decides what income gets taxed where.
• Keep clear records of all income, investments, and taxes paid in India.
• Use tax treaties and credits to prevent paying tax twice.
• Meet deadlines for both Indian and US tax filings.
• Get expert help. TFX offers real human support tailored to expats like you.