The NRI Tax Checklist for Your First Years in the USA (2026)
Vishveshwar Rao · IRS Enrolled Agent
10 min read
Quick answer: If you moved from India to the US recently, your first tax returns come down to five checks: determine whether you are a resident or non-resident alien under the substantial presence test, report worldwide income (including Indian interest and rent) once you are a resident, file an FBAR if your Indian accounts together exceeded $10,000 at any point in the year, check the Form 8938 thresholds, and claim India-US treaty relief through the foreign tax credit instead of assuming the treaty exempts your Indian income. This checklist covers each item, the exact forms, and the costliest first-year mistakes.
Key takeaways
- You are a US tax resident if you were present at least 31 days this year and at least 183 days on a weighted three year count: all of this year's days, one third of last year's, one sixth of the year before (IRS).
- Days on F, J, M, or Q student visas are excluded from that count, but only if you file Form 8843 for each exempt year.
- Once you are a resident alien, the IRS taxes your worldwide income. Indian salary, rent, capital gains, and bank interest all belong on your US return.
- FBAR (FinCEN Form 114) is triggered when all your foreign accounts combined exceeded $10,000 at any time in the year; Form 8938 has higher thresholds ($50,000 single, $100,000 joint, at year end). The obligations are independent; you may need both.
- The India-US treaty (DTAA) prevents double taxation mainly through a foreign tax credit on Form 1116, not by exempting Indian income.
Step 1: Figure Out What You Are (the Substantial Presence Test)
Everything else depends on whether you are a resident or non-resident alien for the year. The substantial presence test decides: you are a resident if you were physically present in the US at least 31 days during the current year, and at least 183 days across a three year window counted as every day this year, plus one third of last year's days, plus one sixth of the days two years ago (IRS, Substantial Presence Test).
Worked example: you landed on an H1B on March 1, 2026 and stayed. That is roughly 300 days in 2026, clearing both bars on current year days alone; you are a resident alien for 2026.
Two wrinkles matter:
- Student visa days do not count. Days spent as an F, J, M, or Q student (and J or Q teachers and trainees) are "exempt individual" days excluded from the test, but only if you file Form 8843.
- New arrivals can elect residency early. If you arrive late in the year and do not yet meet the test, the First-Year Choice lets you be treated as a resident for part of the year (a dual-status return), sometimes by extending your filing deadline until you meet the test the next year (IRS, First-Year Choice). See our post on dual-status returns when moving to the US mid-year.
The Worldwide Income Rule: What Changes the Day You Become a Resident
The moment you are a resident alien, the scope of your return changes. In the IRS's words, resident aliens' "worldwide income is subject to U.S. tax and must be reported on their U.S. tax return" (IRS, Taxation of Resident Aliens).
That includes income that never touched a US bank account: rent from a flat in Hyderabad, interest on Indian fixed deposits, capital gains on Indian shares. Reporting it does not mean paying full US tax on it again, because credits for Indian tax paid usually offset much of the bill. But leaving it off the return is the error the IRS actually penalizes. Our guide to reporting India income on a US tax return goes line by line.
Your Indian Accounts: NRE, NRO, and FD Interest the IRS Expects to See
The most common first-year blind spot: NRE interest. Under Indian rules it is generally exempt from Indian tax (confirm your account classification with your bank), so many new arrivals read "tax-free" and stop thinking about it. But the US does not care what India exempts. Once you are a US resident, NRE, NRO, and FD interest is ordinary taxable interest on your US return, which also asks whether you hold foreign accounts.
For NRO accounts, Indian banks typically deduct TDS on interest; that tax generally becomes a foreign tax credit on your US return (more below). And regardless of taxability, NRE accounts, NRO accounts, and fixed deposits all count toward the FBAR $10,000 aggregate.
FBAR vs Form 8938: Thresholds at a Glance
These are the two disclosure filings, and they are independent obligations. The IRS trigger for FBAR is when the "aggregate value of financial accounts exceeds $10,000 at any time during the calendar year" (IRS, Comparison of Form 8938 and FBAR Requirements). Aggregate means all accounts added together; two FDs of 4.5 lakh each can put you over the line depending on the exchange rate.
| FBAR (FinCEN Form 114) | Form 8938 | |
|---|---|---|
| Threshold | Aggregate over $10,000 at any time in the year | Single/MFS: $50,000 at year end or $75,000 any time. MFJ: $100,000 at year end or $150,000 any time (US residents) |
| Covers | Foreign financial accounts | Broader "specified foreign financial assets" |
| Filed | FinCEN's BSA E-Filing System, separate from your return | Attached to your income tax return |
| Deadline | April 15, automatic extension to October 15, no request needed ([IRS FBAR page](https://www.irs.gov/businesses/small-businesses-self-employed/report-of-foreign-bank-and-financial-accounts-fbar)) | Your tax return deadline |
Meeting one threshold does not excuse you from the other; plenty of filers owe both. For Indian account examples, see our post on FBAR and Form 8938 for Indian accounts; this Blind thread on FBAR and foreign income shows how often it trips people up (community discussion, not an official source).
DTAA Basics: How the India-US Treaty Actually Prevents Double Taxation
The India-US Double Taxation Avoidance Agreement does not make your Indian income exempt in the US. Relief on a US return usually comes as a foreign tax credit: "File Form 1116 to claim the foreign tax credit if you are an individual, estate, or trust, and you paid or accrued certain foreign taxes to a foreign country" (IRS, About Form 1116).
So for NRO interest: report it on your US return, then claim a credit for the Indian TDS deducted. If the Indian rate was lower than your US rate, you pay the difference; if higher, the credit is generally capped at the US tax on that income. One complication: India's tax year runs April to March while the US uses the calendar year, so matching income to tax paid takes care. When in doubt, confirm the treaty position for your income type with a CPA.
ITIN for Your H4 Spouse (and Filing Jointly)
An H4 spouse without work authorization will not have an SSN, but you can usually still file a joint return, which often lowers the total tax bill. The spouse applies for an ITIN using Form W-7, and the IRS is explicit that the application travels with the return: "Include the tax return in your ITIN application package. Don't file it separately" (IRS, ITIN).
If your spouse is a non-resident, an election generally lets you treat them as a resident and file jointly; it makes their worldwide income reportable too, so confirm the tradeoff with a CPA.
Don't Skip State Taxes
Federal is only half the return. Most states start from your federal income, which, as a resident, already includes Indian income. Two cautions:
- Part-year state residency. If you moved between states or arrived mid-year, you may owe a part-year return covering only income earned while resident there; allocation rules differ by state.
- Treaty relief may stop at the state line. Some states do not follow federal treaty provisions, so DTAA positions that work on your 1040 may not carry to your state return; California is most often flagged for this. Confirm your state's treatment with a CPA.
In a no-income-tax state (Texas, Washington, Florida among them), this section is short for you.
The 7 First-Year Mistakes Indians Make Most
- Filing the wrong form. Students filing Form 1040 when they need 1040NR, or new H1Bs filing 1040NR when the substantial presence test already made them residents.
- Skipping Form 8843 during F-1 years. The exempt-day exclusion depends on filing it.
- Treating NRE interest as tax-free everywhere. It is exempt in India, not on a US resident's return.
- Missing FBAR because "the money is in India." The $10,000 test is aggregate and includes NRE, NRO, and FD balances.
- Assuming DTAA means no US tax. It is a credit mechanism, and you must claim it on Form 1116.
- Filing separately because a spouse has no SSN. An ITIN via Form W-7 attached to a joint return usually solves this.
- Holding Indian mutual funds without checking the US treatment. Foreign mutual funds can trigger punishing reporting rules (the PFIC regime); confirm with a CPA before you sell, and ideally before you buy more.
Consumer tax software handles items 2 through 7 poorly; we compare the options in NRI taxes: CPA vs TurboTax.
Your First-Year NRI Tax Checklist
| Check | Form | Who needs it |
|---|---|---|
| Determine residency status | Substantial presence test, no filing | Everyone in year one |
| Exempt individual statement | Form 8843 | F, J, M, Q students, each exempt year |
| Federal income tax return | 1040 (resident), 1040NR, or dual-status | Everyone with US income |
| Report Indian interest, rent, gains | With your 1040 | Residents with Indian income |
| Foreign account report | FinCEN Form 114 (FBAR) | Aggregate foreign accounts over $10,000 at any time |
| Specified foreign assets | Form 8938, with return | Over $50,000/$100,000 (single/MFJ, year end) |
| Foreign tax credit | Form 1116 | Anyone with Indian tax on US-reported income |
| ITIN for spouse without SSN | Form W-7, attached to the return | H4 spouses, non-SSN dependents |
| State return | Varies by state | Residents and part-year residents of taxing states |
FAQ
Should I file Form 1040 or 1040NR in my first H1B year?
Run the substantial presence test. Enough weighted days makes you a resident (Form 1040, possibly dual-status for the arrival year); otherwise you file 1040NR, unless the First-Year Choice election helps you.
Do my F-1 student years count toward the substantial presence test?
No, as long as you filed Form 8843 for those years; F, J, M, and Q student days are excluded as exempt individual days. The student exemption is generally limited to five calendar years, so long F-1 stints can start counting; confirm your count with a CPA.
Is the FBAR $10,000 threshold per account or all accounts combined?
Combined. The IRS language is "aggregate value of financial accounts exceeds $10,000 at any time during the calendar year." Five accounts of $2,500 each cross it together, and a one-day spike over $10,000 still counts.
I forgot to file FBAR in earlier years. What do I do now?
Do not quietly backfile and hope. The IRS has established routes for late disclosures (delinquent FBAR submission procedures, and streamlined procedures where unreported income is involved); the right one depends on whether tax was underpaid and whether the failure was willful. Talk to a CPA before filing anything here.
Do I have to report Indian mutual funds, PPF, or LIC policies on my US taxes?
Often yes, at least on Form 8938, which covers a broader set of "specified foreign financial assets" than FBAR does. Indian mutual funds can fall under the punitive PFIC regime, and PPF and insurance-linked products have their own gray areas. Treat this as a flag to raise with a CPA, not something to self-assess in tax software.
Does the India-US tax treaty (DTAA) mean I won't be taxed twice?
Mostly, but through mechanics, not magic. You report the Indian income on your US return and claim a foreign tax credit (Form 1116) for Indian tax paid on it, which usually eliminates double taxation or reduces it to the rate difference. Mismatched tax years and specially treated income types trip filers up; confirm treaty positions with a CPA.