Do Americans Living in India Still Have to File U.S. Taxes?
Yes. U.S. citizens and green card holders should basically file an annual return even if they pay income taxes in India. The U.S. system embraces the citizenship taxation model. In other words, individuals must report worldwide income on IRS Form 1040 regardless of where they live. This is a major aspect of U.S. tax preparation in India and applies to a wide range of income source as outlined in the below table:
| Income Type | Examples for Americans in India |
|---|
| Employment | Salaries from Indian employers |
| Self-Employment | Freelance, consulting, or business income earned locally |
| Investments | Dividends, interest, or capital gains from Indian or U.S. holdings |
| Property | Rental income from U.S. or Indian real estate |
These reporting obligations naturally raise questions for expats about how Americans living in India taxes interact with U.S. rules. While provisions like the U.S.–India tax treaty, the Foreign Earned Income Exclusion (FEIE India), and FBAR India requirements have the potential to reduce double taxation or address foreign account reporting, filing is still mandatory.
Dimov Tax collaborates with expats to make sure their returns are precise, on the designated time, and simply reflect all applicable credits and treaty benefits in parallel to the U.S. expat tax in India.
Key U.S. Tax Benefits for Expats in India
Two major IRS provisions help reduce double taxation for Americans living in India taxes:
| Benefit | What It Does | 2025 Limit |
|---|
| FEIE India | Excludes a portion of foreign-earned income from U.S. tax if eligibility tests are satisfied | Up to US$130,000 |
| Foreign Tax Credit (FTC) | Offsets U.S. tax by the amount of income tax paid to India | Based on actual Indian taxes paid |
Both may be applied in the same year, in accordance with the income type and filing status. When paired with the U.S.–India tax treaty and reporting steps like FBAR India, they form a significant part of effective U.S. tax preparation in India.
U.S.–India Income Tax Treaty & Totalization Agreement
The U.S.–India tax treaty is central to reducing double taxation for expats. It clarifies how income is taxed between the two countries and presents targeted benefits:
- Reduced or exempt tax on specific income types like pensions and royalties as well as interest.
- Special provisions for students and teachers along with researchers residing temporarily in India.
- Clear rules that define where income should be taxed, helping prevent conflicts between tax systems.
Social Security / EPF coordination. There is no U.S.–India Totalization Agreement. If you work for a U.S. employer in India, U.S. Social Security and Medicare (FICA) generally still apply;
if you’re self-employed, U.S. self-employment tax usually applies even if you claim the FEIE. Indian EPF rules may also apply depending on your employment status, so dual coverage can occur.
Moreover, the Totalization Agreement has a critical role for workers with links to both countries:
- Prevents paying into both U.S. Social Security and India’s Provident Fund at the same time.
- Enables work credits earned in one country to be combined with the other, protecting retirement benefits.
For anyone focused on U.S. tax preparation in India, the mentioned agreements are fundamental tools. They interact with other expat strategies such as the FEIE India, the Foreign Tax Credit, and compliance obligations like FBAR India. With the correct approach, they would have a streamlining influence on U.S. expat tax in India while safeguarding income alongside future benefits.
Reporting Requirements: Foreign Assets & Residency
For those focused on U.S. tax preparation in India, it is not just about income taxes—foreign account reporting is equally important. Americans living in India taxes may also generate separate filing obligations as outlined in the table below:
| Form | When It’s Required | Key Point |
|---|
| FBAR (FinCEN Form 114) | If the total balance of all non-U.S. bank accounts, including Indian accounts, exceeds US$10,000 at any time in the year | Applies even if accounts generate no income |
| Form 8938 (FATCA) | If the value of specified foreign financial assets is above IRS thresholds | Thresholds vary by filing status and residency |
These filings are independent of the U.S. tax return and organically carry steep penalty amounts if overlooked. Naturally, full compliance with FBAR India and FATCA is as critical as claiming benefits like the FEIE India or applying treaty relief under the U.S.–India tax treaty for relevant expats balancing U.S. expat tax in India.
Indian Tax System Overview (from a U.S. Perspective)
Americans working in India should also recognize well how the local tax framework distincts from U.S. rules and how those distinctions influence the filings. When planning U.S. tax preparation in India, the factors listed on the below table are especially relevant:
U.S. Tax Preparation India – System Comparison
| Feature | India | United States |
|---|
| Tax Authority | Central Board of Direct Taxes (CBDT) | Internal Revenue Service (IRS) |
| Tax Year | April 1 – March 31 | January 1 – December 31 |
| Employment Tax | TDS (Tax Deducted at Source): Employers withhold tax from salary | Federal income tax withholding by employers |
| Income Tax | Progressive rates, with slabs in accordance with the income level | Federal income tax plus possible state income taxes |
| Taxpayer ID | Permanent Account Number (PAN) required for filings and transactions | Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) |
| Social Security | Employees’ Provident Fund (EPF) contributions for retirement benefits | Social Security & Medicare payroll taxes |
| Indirect Tax | Goods and Services Tax (GST) applies to most goods and services | Sales tax varies by state, not federal |
For Americans living in India, the structural differences outlined above generally mean additional planning. The different fiscal years in particular can easily establish timing mismatches when applying credits like the FEIE India or using relief in parallel to the U.S.–India tax treaty. Coordinating documentation also matters, since reporting obligations like FBAR India may overlap with Indian account records.
Handling Tax Backlogs & Compliance Issues
It should also be acknowledged that falling behind on returns is more common than just a possibility for expats focused on U.S. tax preparation in India. Many Americans living in India are unaware that U.S. filings remain mandatory even when Indian taxes are being paid.
Considering this fact, the IRS presents the Streamlined Filing Compliance Procedures, which aid taxpayers in catching up without harsh penalty payments if their noncompliance was unintentional. This program typically requires:
- Filing the last three years of overdue U.S. tax returns.
- Submitting the last six years of FBAR India reports for foreign accounts.
- Certifying that the failure to file was not willful.
Such a pathway is specifically valuable for those balancing U.S. expat tax in India, where income may already be reported under Indian rules. Using treaty relief from the U.S.–India tax treaty and credits like the FEIE India, Dimov Tax presents professional guidance in making sure that back filings are corrected.
Benefits of Working with Dimov Tax
In the context of U.S. tax preparation in India, collaborating with the correct partner makes sure that every detail is managed successfully. With Dimov Tax on your side, you benefit from the privileges below:
- Expert Guidance: Direct access to senior professionals with on-field experience in both Indian and U.S. systems, covering specifically how the U.S.–India tax treaty applies to expats.
- Comprehensive Support: Full-service compliance covering IRS forms, FEIE India and Foreign Tax Credit optimization, and reporting requirements like FBAR India and FATCA.
- Clear Process: A secure system for sharing documents and maintaining consistent communication at every stage.
This combination makes Dimov Tax the trusted choice for U.S. expat tax in India, giving peace of mind to Americans living in India taxes by establishing full precision in every filing.
How to Get Started
The initial step in U.S. tax preparation in India is naturally to have the right documents ready. Collecting these in advance contributes to the process, and Dimov Tax streamlines the filing and makes sure that nothing is missed:
- Income Records: U.S. and Indian wage slips, freelance earnings, and investment summaries.
- Bank Statements: From Indian and overseas accounts, relevant for FBAR India reporting.
- PAN and TDS Certificates: Required for Indian filings and for coordinating with U.S. tax obligations.
- Proof of Residence: Documents that establish the time in India, important for FEIE India eligibility.
Schedule your initial India Expat Tax Strategy Call today to take the next step toward fully compliant and stress-free filing.
