US tax filing from India — 2026 guide for US citizens and green-card holders

The United States taxes its citizens and green-card holders on worldwide income regardless of where they live — an approach shared by only one other country (Eritrea). An American of Indian origin living in India on an OCI card remains a US taxpayer. A green-card holder who relocates to India retains the filing obligation until they formally abandon the green card. Indian citizenship and OCI cards do not change the picture on the US side. This page covers the 2026 US filing framework from India, the tools that reduce the US tax bill (Foreign Earned Income Exclusion, Foreign Tax Credit), the disclosure obligations (FBAR, FATCA), the PFIC trap that catches most Indian mutual funds, and the Streamlined Foreign Offshore Procedures for cleaning up past non-filing.

The rule in one sentence

If you are a US citizen or green-card holder anywhere in the world, you file a US Form 1040 every year and report your worldwide income.

No exception for OCI holders. No exception for long-term residents of India. No exception for low income (if you have any income above the filing threshold, you file). The only way out is renouncing US citizenship or formally abandoning the green card — see renouncing US citizenship.

Filing thresholds — do I have to file at all?

You must file a US Form 1040 for 2025 (filed in 2026) if your gross income exceeds:

Filing status	Under 65	65 or older
Single	US$14,600	US$16,550
Married Filing Jointly	US$29,200	US$30,750 / $31,550 / $33,100 depending
Married Filing Separately	US$5 (yes, five dollars)	US$5
Head of Household	US$21,900	US$23,850
Self-employment	US$400 in net SE earnings	US$400

(Thresholds inflation-adjusted annually; 2025 figures above. Confirm the current year on IRS.gov.)

Even below threshold, filing is often the smart move:

Claim a refund of US withholding on Indian income that is not actually US-taxable after FTC / treaty.
Start the three-year statute of limitations on audit. Non-filed years never begin the clock.
Receive dependent-related credits (Child Tax Credit, Additional Child Tax Credit) where a US citizen child qualifies.
Establish an ongoing compliance record that smooths future US return applications, visa renewals, Social Security enrollment.

Self-employment income ≥ $400 triggers a filing obligation regardless of other income — US citizens freelancing from India should note this.

Filing deadlines from abroad

US citizens and residents residing abroad on 15 April get an automatic 2-month extension to 15 June (US filing deadline for expats). Details:

Automatic extension — no form to file; attach a statement to the return explaining you were abroad on 15 April.
Interest on tax due runs from 15 April — the extension is a filing extension, not a payment extension.
Further extension to 15 October available on Form 4868 (filed by 15 June).
Final extension to 15 December possible on written request to the IRS in exceptional cases.
FBAR has its own deadline — 15 April with automatic extension to 15 October.

The two big reliefs — FEIE and FTC

US citizens abroad use one (or both) of two mechanisms to avoid double taxation on foreign-earned income.

Foreign Earned Income Exclusion (FEIE) — Form 2555

Excludes earned income (salary, wages, self- employment income) from US tax up to an inflation- adjusted cap:

2024: US$126,500
2025: ~US$130,000 (check IRS 2025 final figure)
2026: higher with inflation

Plus a housing exclusion for foreign housing costs above a base amount. The housing exclusion is also capped, with an India-Bengaluru / Mumbai adjustment where the IRS publishes higher limits for high-cost cities.

Qualifying for FEIE

Must meet one of two tests:

Physical Presence Test (PPT) — present in a foreign country / countries for 330 full days in any 12-consecutive-month period. Count full 24-hour days only (partial days don't count).
Bona Fide Residence Test (BFR) — bona fide resident of a foreign country for an entire tax year (uninterrupted period including a full calendar year).

BFR is the stronger test but requires genuine residence — visits to the US undermine it. PPT is easier for temporary arrangements but requires careful day-counting.

What FEIE does NOT cover

Passive income — interest, dividends, capital gains, rental income, pension distributions.
Social Security payments and other government benefits.
Investment gains.

For these, use the Foreign Tax Credit.

Foreign Tax Credit (FTC) — Form 1116

Credits foreign tax paid against US tax liability on the same income. Separate calculations for different income "baskets":

General basket — salary, self-employment, rental (active), business income.
Passive basket — interest, dividends, capital gains, royalties.
Other baskets — GILTI, foreign branch, high tax.

When FTC beats FEIE

Indian income above the FEIE cap — use FEIE up to the cap, FTC on the excess.
Passive Indian income — FEIE doesn't apply; FTC is the only option.
High-Indian-tax salary — if Indian tax rate is higher than effective US rate on the income (which it usually is at the top slabs), FTC alone often gives a better result than FEIE (and leaves room for other credit against US tax).
US state taxes — states generally don't allow FEIE; FTC may help at state level (varies).

When FEIE beats FTC

Indian income below the FEIE cap on a low-Indian-tax structure.
Simplicity — Form 2555 is simpler than Form 1116.
Self-employment cases where Indian tax is low.

Many practitioners run both calculations and pick the better result. Switching between FEIE and FTC is possible but restricted (revocation of FEIE locks you out for 5 years).

FBAR — FinCEN Form 114

A separate filing from Form 1040, to FinCEN not the IRS.

Who files

US citizens, green-card holders, and US residents (for US-tax purposes) who have signature authority or financial interest in one or more foreign financial accounts whose aggregate maximum balance exceeds US$10,000 at any point during the calendar year.

What counts

All foreign financial accounts:

Indian savings / current bank accounts (NRE, NRO, FCNR, resident).
Indian demat accounts.
Indian PPF.
Indian EPF / EPS.
Indian mutual fund folios.
Indian fixed deposits (held at a bank).
Indian LIC policies with cash value.
NPS Tier 1 and Tier 2 accounts.
Safe deposit boxes containing financial instruments (generally yes, though some practitioners treat as out-of-scope).

Filing

Electronic only via BSA E-Filing System at bsaefiling.fincen.treas.gov.
Deadline: 15 April, auto-extended to 15 October for all filers.
Penalties:
- Non-willful: US$10,000 per violation (up from $12,921 2024-adjusted — check current).
- Willful: greater of US$100,000 or 50% of account balance per violation.
- Multi-year non-compliance compounds.

For FBAR-vs-FATCA mechanics, see FBAR vs FATCA compared.

FATCA — Form 8938

Filed with the Form 1040, reports specified foreign financial assets above threshold.

Thresholds (2025–26)

Filing status	End of year	Any point during year
Single / HoH (US)	US$50,000	US$75,000
MFJ (US)	US$100,000	US$150,000
Single / HoH (abroad)	US$200,000	US$300,000
MFJ (abroad)	US$400,000	US$600,000

What's reportable

Foreign financial accounts (overlap with FBAR).
Foreign stocks / securities held outside a foreign financial institution's account.
Foreign partnership interests.
Foreign life insurance / annuity contracts with cash value.
Interests in foreign trusts, corporations, partnerships.
Foreign pensions (EPS, EPF, NPS — reportable).

What's NOT reportable

Direct foreign real estate (Indian flat, Indian plot). Not reportable unless held through a foreign entity.
Tangible personal property (jewellery, art) held abroad.
Foreign social security benefits.

See NRI property and FATCA for the real-estate-specific detail.

Penalties

Non-filing: US$10,000 per year.
Continued failure after IRS notice: additional US$10,000 per 30-day period up to US$50,000 maximum.
Underpayment penalty: additional 40% on underpaid tax.

The PFIC trap — Indian mutual funds

Passive Foreign Investment Companies (PFICs) — foreign mutual funds, ETFs, pooled investments — are treated punitively by US tax law under Sections 1291–1298.

Why Indian mutual funds are PFICs

Foreign corporation (the AMC's fund vehicle).
Passive income (investment income) makes up > 75% of gross income, OR passive assets are > 50% of total assets (both tests; mutual funds invariably meet at least one).

The default regime (Section 1291)

Excess distributions (amounts exceeding 125% of the prior 3-year average) are taxed at the highest marginal ordinary rate for the year the distribution was received.
Interest charge added on the "deferred tax" from prior years — compounds punitively for long-held positions.
No capital-gains preferential rate.
Non-deductible against other income losses.

Better alternatives (elections)

Qualified Electing Fund (QEF) election — treats the PFIC as a pass-through, taxed currently on fund's income. Requires PFIC annual information statement from the fund (most Indian AMCs do not provide this).
Mark-to-Market (MTM) election — annually mark the PFIC to FMV; gains taxed as ordinary income each year. Simpler; requires filing election in first PFIC year.

Form 8621

Filed annually for each PFIC held, regardless of elections. Complex; fees from a US-tax CPA familiar with Indian MFs run US$500+ per fund per year.

Practical takeaway

US citizens / GC holders in India should avoid Indian mutual funds. Own individual Indian stocks (not PFIC if directly held) or US-based funds with Indian exposure instead.
Existing Indian MF positions — consider MTM election in year of acquisition; otherwise unwind as tax-efficiently as possible.

India-US DTAA — what it does and doesn't do

The India-US Double Taxation Avoidance Agreement (1989, effective 1990) runs alongside the US worldwide-tax regime.

The saving clause

Article 1(3) of the India-US DTAA contains a saving clause — the US reserves the right to tax its citizens and residents as if the treaty had not come into force, except for specific provisions preserved for citizens.

Effect: The DTAA does not reduce US tax on the US-citizen's worldwide income except in narrow carve-outs. FTC against Indian tax paid remains the primary relief mechanism.

What the DTAA does help with

Indian-side withholding on payments to the US citizen — TRC + Form 10F + PAN unlocks treaty rates on Indian interest, dividends, capital gains.
Pension articles 19/20 — govern which country can tax specific pension types. See Indian pension and the US DTAA.
Article 21 (Students) — tax benefits for Indian students in US and US students in India.
Foreign Tax Credit computation — the treaty supports creditability of Indian tax.

For the DTAA framework generally see DTAA and how it works.

Income-specific US treatment for a US citizen

in India

Indian salary / employment

Form 1040 reports in USD (convert at annual-average or spot rate).
Form 2555 FEIE excludes up to ~US$130k (2025).
Form 1116 FTC for excess or in lieu of FEIE.
Self-employment tax (SE) — US citizens abroad still pay SECA on net self-employment earnings over US$400 unless a totalisation agreement applies. India has no SS totalisation agreement with the US — so Indian freelancers who are US citizens pay both Indian tax and US self-employment tax (15.3%). A material planning issue.

Indian interest (NRO / bank FD)

Fully taxable on Form 1040 (Schedule B interest).
FTC for Indian TDS paid.
No FEIE (passive income).

NRE / FCNR interest

Exempt in India under Sections 10(4) / 10(15).
Fully taxable in the US — Indian exemption does not carry over.
No FTC available (no Indian tax to credit).

Indian mutual funds

PFIC treatment — see above. Significant US tax cost.

Indian direct equity

Indian dividends: Schedule B, FTC for Indian DDT / TDS. US qualified-dividend rates generally apply.
Capital gains: Schedule D. Treatment depends on holding period and US LTCG rules.

Indian rental income

Schedule E.
Convert gross rent to USD.
US-side allowable expenses including MACRS depreciation (30-year residential).
FTC for Indian tax paid (usually slab rates at 30%+).
Possible passive-activity-loss limitations.

Indian property sale

Schedule D capital gain.
Section 1250 depreciation recapture at 25% on accumulated depreciation.
FTC for Indian LTCG tax (12.5% post July 2024) and surcharge / cess.
US tax at 15% / 20% LTCG rate plus 3.8% NIIT.

See NRI property and FATCA.

Indian PPF / EPF / EPS / NPS

PPF: Reportable on FBAR and Form 8938. Interest taxable as earned on US return (Indian tax-exempt status doesn't apply).
EPF: US tax treatment depends on characterisation — employer / employee contributions, interest. Frequently treated as foreign pension / deferred comp, currently taxable on US return.
EPS: Taxable as received under Article 20 treatment.
NPS: Annuity portion taxable as received; lump-sum portion may be taxable differently.

These are among the most contested areas of Indian-resident US-citizen tax and warrant specialist advice.

Indian pension (received in India by US

citizen)

Government-service pension (Article 19) — for a US citizen, treaty allocates to US only under the resident-and-national exception; saving clause preserves US taxation.
Private pension (Article 20) — taxable only in US.
FTC for any Indian tax paid.

See Indian pension and the US DTAA.

Net Investment Income Tax (NIIT)

3.8% additional tax on net investment income above Modified Adjusted Gross Income thresholds (US$200k single / $250k MFJ).

Applies to US citizens abroad.
Not creditable with FTC (the tax is not technically an income tax in the treaty-relief sense).
Hits Indian investment income (interest, dividends, capital gains, rental) for high-income US-citizen Indian residents.

A 3.8% NIIT on top of regular US income tax (which already has Indian tax credited) creates an effective double-taxation pocket at high income levels.

Streamlined Foreign Offshore Procedures

For US citizens / green-card holders who have non-wilfully failed to file US returns or FBARs while abroad, the IRS offers the Streamlined Foreign Offshore Procedures (SFOP) — a rehabilitation path.

Eligibility

Non-wilful conduct — negligent, inadvertent, or based on good-faith misunderstanding of filing obligation.
Taxpayer physically outside the US for at least 330 days in at least one of the three most recent tax years before filing the Streamlined submission.
No ongoing IRS audit.

What to file

Last 3 years of Form 1040 (amended or late-filed as needed).
Last 6 years of FBAR.
Certification on Form 14653 — attestation of non-wilfulness.
Payment of all tax due plus interest.
No FBAR penalty — the Streamlined path waives the $10k per non-willful violation penalty.

Alternative — Delinquent FBAR Submission

Procedures

For cases where no tax is owed but FBARs were missed. Simpler; no Form 1040 amendment required.

Compliance before renunciation

Streamlined is the single most valuable tool for US citizens in India planning to renounce. The certification requirement on Form 8854 for renunciation (covered-expatriate test) catches anyone with 5+ years of non-compliance. Clean up through Streamlined first; then renounce. See renouncing US citizenship.

Common pitfalls

Assuming OCI status exempts from US filing. It doesn't. OCI is Indian-side status.
Skipping FBAR. The $10k non-wilful per violation penalty is punitive; multi-year compounding is routine.
Holding Indian mutual funds — PFIC trap. Direct stocks or US-based ETFs preferred.
Using only FEIE on passive income. FEIE covers earned income only.
Missing NRE / FCNR interest on US return — Indian exemption doesn't carry.
Forgetting self-employment tax on Indian freelance income — 15.3% SECA regardless of FEIE.
Revoking FEIE without planning — 5-year lockout applies.
Late filing thinking "no income, no return" — for GC holders below threshold, filing is still prudent; for those above threshold, non-filing opens open-ended statute exposure.
Ignoring NIIT on passive income. 3.8% bites.
Expecting DTAA to reduce US tax. Saving clause negates most treaty benefits for US citizens; FTC is the only real relief.
Mixing up FBAR and FATCA filings. Separate — FBAR to FinCEN, FATCA (Form 8938) with 1040.
Reporting PPF / EPF inconsistently. Tax treatment is contested; consistency across years is more important than picking "the right answer" de novo.
Planning a renunciation without Streamlined clean-up first. Form 8854 non-certification creates a covered expatriate regardless of net worth.

Checklist — annual US filing from India

Confirm US tax obligation — US citizen or GC holder? Both file on worldwide income.
Track days for PPT / BFR qualification if using FEIE.
Gather Indian income records — Form 16, Form 16A, bank statements, broker statements, rental agreements, capital gains statements.
Convert to USD at annual average or spot rate consistently.
Choose FEIE vs FTC — run both computations; pick the lower overall.
Prepare Form 1040 with Schedule B (FBAR disclosure box), Schedule D (capital gains), Schedule E (rental).
Attach Form 2555 if claiming FEIE.
Attach Form 1116 for FTC.
Attach Form 8938 if thresholds crossed.
File FBAR separately on FinCEN 114.
Form 8621 for each PFIC (Indian MF).
Form 8833 for treaty-based positions under DTAA Articles.
File by 15 June (automatic extension) or 15 October (with 4868).
Pay tax due by 15 April to avoid interest.
Retain all supporting documents for 7 years.

Summary

US citizens and green-card holders file US taxes on worldwide income regardless of residence. OCI does not change this.
Two reliefs from double taxation: Foreign Earned Income Exclusion (Form 2555, ~US$130k 2025 cap, earned income only) and Foreign Tax Credit (Form 1116, all foreign tax paid, all income types).
FBAR (FinCEN 114) on Indian financial accounts aggregate > US$10k; FATCA Form 8938 at higher thresholds.
Indian mutual funds are PFICs — punitive US tax without QEF / MTM election. Avoid where possible.
NRE / FCNR interest is exempt in India but fully US-taxable.
India-US DTAA runs under the saving clause; FTC is the main relief; treaty helps on Indian-side withholding.
Streamlined Foreign Offshore Procedures clean up non-wilful past non-filing — last 3 returns + 6 FBARs, no penalty.
Filing deadlines: automatic 2-month extension to 15 June for expats; FBAR 15 April (auto-extended to 15 October).
Non-filing risk — statute of limitations never starts; IRS can reach back indefinitely.

For NRI taxation on the Indian side, see NRI taxation in India. For residence mechanics, see tax residence in India. For FBAR-vs-FATCA specifics, see FBAR vs FATCA compared. For the India-US pension DTAA detail, see Indian pension and the US DTAA. For Indian property and FATCA, see NRI property and FATCA. For the renunciation pathway, see renouncing US citizenship. For the dual-citizenship framework, see dual citizenship and India.