How to report India income on your US tax return (and avoid double taxation)

If you moved to the US and left behind a savings account, a fixed deposit, a flat that rents out, or some mutual funds, this question hits every March: does the IRS care about money I earned in India? The short answer is yes, and the rules are more mechanical than they look. This post covers what you report, where it goes on the return, and how the double-taxation relief actually works in both directions.

Does the IRS really tax my India income if I live in the US?

It does, because of how the US defines a tax resident. You are a US tax resident if you meet either test:

• Green card test: you held a green card at any point in the year. Days in the US do not matter; the card alone makes you a resident.
• Substantial presence test: you were physically in the US at least 31 days this year and 183 days across a weighted three-year count (all days this year, one third of last year's days, one sixth of the year before). The exact math is on the IRS substantial presence page.

Almost everyone working in the US on H1B, L1, or a green card meets one of these. And the IRS is explicit: resident aliens follow the same rules as US citizens and report worldwide income. "NRI" is an Indian tax label. It means nothing to the IRS. For US purposes you are simply a resident, and residents report everything, everywhere.

One nuance: students on F1 are usually exempt from counting days for their first five calendar years, so many F1 students are nonresidents who do not report India income. The moment you switch to H1B and pass the day count, that protection ends.

What India income do I have to report?

All of it, converted to US dollars. There is no minimum: twelve dollars of interest is still reportable income. The dollar thresholds you may have heard about ($10,000, $50,000) belong to the FBAR and Form 8938 disclosures covered below, not to whether income goes on your return. The common categories:

• NRO account interest. Taxable in India, taxable in the US.
• NRE account interest. Tax free in India, fully taxable in the US. More on this below, because it surprises almost everyone.
• FCNR deposit interest. Same story as NRE: exempt in India while you are an NRI, taxable in the US.
• Rent from Indian property. Taxable in both countries. On the US side it goes on Schedule E, and you can deduct expenses and claim depreciation under US rules.
• Dividends from Indian stocks. Taxable in both.
• Capital gains from selling Indian stocks, mutual funds, or property. The US computes the gain its own way: your cost basis in dollars, US holding-period rules, no Indian indexation. India's rates (such as the 12.5 percent long-term rate that applied after the July 2024 changes) do not transfer to your US return.

Here is the side-by-side that resolves most of the confusion:

For converting rupees to dollars, the IRS accepts its published yearly average exchange rates for income earned throughout the year.

Why is my NRE interest taxable in the US when India says it is tax free?

Because the exemption is India's, not the world's. India exempts NRE interest to attract foreign-currency deposits from NRIs. The US never agreed to that exemption, and the India-US treaty does not extend it. To the IRS, interest is interest.

This is the single most common error in NRI returns. People reason "no tax was deducted, no Indian tax form was issued, so there is nothing to report." Wrong on both counts. No TDS does not mean not taxable, and the absence of a 1099 does not remove the reporting obligation. Your NRE interest belongs on Schedule B like any other interest, and Schedule B Part III also asks directly whether you have foreign accounts. Answering that question falsely is a much bigger problem than the tax itself, which on typical deposit interest is usually modest.

The flip side is real too: because there is no Indian tax on NRE interest, there is no foreign tax credit for it. You just pay US tax on it, at your ordinary rate.

How do I avoid being taxed twice on the same income?

Two mechanisms, and they work together.

1. The foreign tax credit (Form 1116). For income taxed in both countries, the US gives you a dollar-for-dollar credit for Indian income tax you owed, up to the US tax attributable to that income. Interest, dividends, and rent fall in the "passive category" on Form 1116. Capital gains are trickier. When a US resident sells personal property such as Indian shares or mutual fund units, US sourcing rules treat the gain as US-source, which leaves zero room for a credit in the passive basket. The treaty fixes this by re-sourcing income India is allowed to tax (Article 25 of the DTAA), but you have to claim it on a separate Form 1116 using the "certain income re-sourced by treaty" category. Mainstream tax software will not do this unprompted, and it is one of the most common DIY failure points in NRI returns. Gains on Indian real estate are foreign-source anyway and stay in the passive basket. There is a simplified election that skips Form 1116 entirely for small amounts of foreign tax (up to $300 single, $600 married filing jointly), but it requires the income to appear on a payee statement like a 1099, which Indian banks do not issue, and it forfeits any carryover, so most NRIs file the full form. The credit is not always a full offset either: if India taxed your NRO interest at 30 percent and your US rate on it is 22 percent, the credit caps at the US tax, and the excess carries over rather than refunding.

2. The DTAA at source. The India-US treaty caps Indian tax on interest paid to a US resident at 15 percent (Article 11). Indian banks deduct TDS on NRO interest at 30 percent plus surcharge and cess by default. To get the treaty rate applied upfront, you give your bank a Tax Residency Certificate from the IRS (Form 6166, requested via Form 8802) plus India's Form 10F. Less tax withheld in India means less cash stuck waiting for an Indian refund.

The reverse direction, for completeness: if you are a tax resident of India (say, after moving back) claiming credit in India for US taxes, that is done through India's Form 67 under Rule 128. Form 67 is due on or before the end of the relevant assessment year, but only if your Indian return itself was filed within the normal original or belated deadlines; if you file an updated return instead, Form 67 must go in along with it. Miss the window and the credit can be denied. This matters when you return to India while still holding US income, a scenario we cover in selling RSUs after moving back to India.

I already paid TDS in India. Am I done?

No, and this assumption causes real damage. TDS is withholding, not a final settlement, and it changes nothing about your US obligations:

• You still report the gross income on your US return.
• Your foreign tax credit is based on the Indian tax you finally owed, not the TDS deducted. If the bank withheld 30 percent but your actual Indian liability after filing an Indian return (ITR) is lower, only the final liability is creditable. A refundable excess is not a creditable tax.
• Often you should file an Indian ITR to recover over-withheld TDS, especially if your total Indian income is below Indian exemption thresholds.

Keep the paper trail. Your Form 26AS and Annual Information Statement (AIS) from the Indian income tax portal, your bank's interest certificates, and the filed ITR with its tax computation are the documents that substantiate the Indian income and tax you put on Form 1116 if the IRS ever asks. Download them each year while you still have easy portal access.

Treat the two systems as separate ledgers connected only by the credit. India first computes what you owe India. The US taxes everything and then credits what you genuinely paid India.

What deadlines apply, and do I get the June 15 extension?

Probably not, and this trips up a lot of NRIs. The automatic two-month extension to June 15 is for US citizens and residents whose tax home and abode are outside the US on the regular due date. It is for Americans living abroad. If you are an Indian citizen living in Texas, you are not "abroad" in the IRS's eyes, and your deadline is the normal April 15. Even for people who do qualify, interest on unpaid tax runs from April 15, and a statement claiming the extension must be attached to the return.

• April 15: filing and payment deadline for US residents living in the US.
• October 15: extended filing deadline if you file Form 4868 by April 15. Payment is still due April 15.
• FBAR: due April 15 with an automatic extension to October 15, no request needed.

Do I also need to file FBAR or Form 8938?

Very possibly. If the combined value of your Indian accounts (NRE, NRO, FCNR, fixed deposits, even accounts you only have signature authority over) exceeded $10,000 at any point in the year, you file FinCEN Form 114, the FBAR. Separately, Form 8938 kicks in at $50,000 in foreign financial assets on the last day of the year (or $75,000 anytime) for single filers living in the US, double for married filing jointly. These are disclosures, not taxes, but the penalties for skipping them dwarf the tax on the underlying interest. One more flag: Indian mutual funds are generally PFICs for US purposes, which brings Form 8621 and genuinely unpleasant tax math. That one deserves professional eyes before you buy or sell.

If your India income is one NRO account generating a few thousand rupees of interest, you do not need to hire anyone: report the interest on Schedule B, answer the foreign-account questions honestly, file the FBAR online, and mainstream tax software handles it. Where it gets beyond DIY is the combination cases: rent plus depreciation, capital gains that need the re-sourced-by-treaty Form 1116, a property sale with TDS refunds pending, PFIC mutual funds, or a year where your equity compensation overlaps with Indian income (see how that interacts in RSU taxes on H1B, or the stakes if you later leave the US with a green card). If that is your year, Lesser prepares cross-border returns for exactly this profile; and if a look at your documents says this is a DIY year after all, that is exactly what we will tell you.

Rules, treaty procedures, and Indian TDS rates change. This page was last checked in 2026 against the IRS and Indian Income Tax Department sources linked above; confirm current numbers there before filing.