Updated 7 min readBy the Elite B Taxes team
Quick answer
If you pass the substantial presence test you are a U.S. resident for tax purposes, file Form 1040 and report your worldwide income — including income in India. If you don't, you are generally a nonresident, file Form 1040-NR and report only U.S.-source income. Foreign tax credits and the U.S.–India treaty help prevent the same income being taxed twice.
Key points
- Most H-1B workers become U.S. tax residents in their first or second year.
- Residents report worldwide income: Indian interest, rent and capital gains included.
- Foreign tax credits usually offset tax already paid in India.
- Your first and last years in the U.S. can be "dual-status" — these returns need extra care.
What is the substantial presence test?
You meet the test if you were physically in the U.S. for at least 31 days this year and at least 183 days over three years, counting all days this year, one-third of last year's days and one-sixth of the days two years ago.
Some days don't count — for example, many F-1 and J-1 students and scholars are "exempt individuals" for a number of years.
Should I file Form 1040 or Form 1040-NR?
Your residency status decides the form:
- U.S. tax resident (green card or substantial presence): Form 1040, worldwide income, standard deduction available
- Nonresident: Form 1040-NR, U.S.-source income only, limited deductions
- Year you arrive or leave: possibly a dual-status return, or an election to be treated as resident for the full year
Do I report income from India on my U.S. return?
If you are a U.S. tax resident, yes. Interest on Indian bank deposits (including NRO accounts), rental income, dividends and capital gains on Indian property or shares are all reportable. Tax already paid in India can usually be claimed as a foreign tax credit.
You may also need to file an FBAR and Form 8938 for your Indian accounts and investments.
How does the U.S.–India tax treaty help?
The treaty decides which country has the first right to tax certain income and how residency conflicts are resolved. Combined with foreign tax credits, it usually prevents double taxation — but you may still need to file returns in both countries.
Do U.S. citizens or green card holders living in India still file?
Yes. U.S. citizens and green card holders must file a U.S. return every year that their income is above the filing threshold, wherever they live. The foreign earned income exclusion or foreign tax credits often reduce or eliminate the U.S. tax due.
This guide is general information, not tax or legal advice for your situation. Tax rules change — talk to a professional before acting.