Financial & Passport Rules
Avoid Being Taxed Twice
The United States and India share a Double Taxation Avoidance Agreement (DTAA). If you are an NRI working in the US or a US citizen, this treaty prevents both countries from taxing the same source of income.
Foreign Tax Credit (FTC)
Under US tax code Section 901/904, if you pay taxes in India on interest income, rental income, or capital gains, you can claim a Foreign Tax Credit (Form 1116) on your US IRS Form 1040 tax return to offset your US tax liability dollar-for-dollar.
FBAR (FinCEN Form 114)
Any US Person (citizens, green card holders, and visa holders meeting the Substantial Presence Test) must file an FBAR if the aggregate maximum value of all foreign bank accounts (e.g., NRE, NRO, PPF in India) exceeds $10,000 USD at any point during the calendar year.
FATCA (Form 8938)
Unlike FBAR, FATCA is filed directly with your IRS tax return on Form 8938. The filing threshold for single tax filers living in the US is an aggregate value of foreign assets exceeding $50,000 on the last day of the year, or $75,000 at any time during the year.
The TDS Trap (Section 195)
When an NRI sells property in India, the buyer is required to deduct TDS (Tax Deducted at Source) on the total sale price of the property, not just the capital gain. The TDS rate for Long-Term Capital Gains (LTCG) is 20.8%.
How to Avoid Excessive TDS: Lower Deduction Certificate (Form 13)
To prevent withholding 20%+ of your entire home sale value, apply for a Lower Deduction Certificate (LDC) under Form 13 with the Income Tax Department in India.
Surrender Certificate (Renunciation of Citizenship)
Under Indian law, dual citizenship is not allowed. As soon as you acquire citizenship in another country (such as the US) and receive a US passport, you must surrender your Indian passport to the nearest consulate and obtain a Surrender Certificate within 3 years to avoid fines.
OCI Card Application & Renewal Rules
Once your Indian passport is surrendered, you can apply for an OCI (Overseas Citizen of India) card, which serves as a lifelong multi-entry visa to live, work, and own non-agricultural property in India.
All Tax & Financial Compliance Guides
FBAR (FinCEN Form 114) Filing Guide
Complete guide to filing FinCEN Form 114 for overseas bank accounts, including thresholds, deadlines, and penalty protection.
Read Guide →FATCA Form 8938 Filing Requirements
Detailed overview of the Foreign Account Tax Compliance Act (FATCA) and IRS Form 8938 reporting thresholds for expats.
Read Guide →PFIC Mutual Funds (Form 8621) Pitfalls
Why US expats and green card holders should avoid purchasing foreign mutual funds, ETFs, and unit trusts.
Read Guide →US-India DTAA Double Taxation Avoidance
Understanding tax treaty benefits under the US-India Double Tax Avoidance Agreement (DTAA) for NRIs and expats.
Read Guide →Withholding Tax on Indian Property Sales (TDS)
How US-based NRIs can navigate the 20% Tax Deducted at Source (TDS) plus surcharge when selling property in India.
Read Guide →IRS Substantial Presence Test (SPT)
Comprehensive breakdown of how the IRS calculates tax residency using the 183-day weighted formula.
Read Guide →Form W-8BEN vs Form W-9 for Expats
Determining which tax withholding form to submit to US banks and brokerages as a visa holder or citizen.
Read Guide →Social Security Totalization Agreements
How bilateral agreements prevent double social security taxes for expats working internationally.
Read Guide →Reporting Foreign Gifts (Form 3520)
When and how to report foreign gifts and inheritances over $100,000 from foreign persons on IRS Form 3520.
Read Guide →Foreign Earned Income Exclusion (FEIE)
Exclude up to $126,500 (2024) of foreign-earned wages from US tax using Form 2555 — the biggest tax break for Americans abroad.
Read Guide →Foreign Tax Credit (Form 1116) Guide
Claim a dollar-for-dollar credit on US taxes for income taxes paid to foreign governments, preventing double taxation.
Read Guide →Filing Dual-Status Tax Returns
How to correctly file taxes in the year you arrive in or depart from the United States as a resident alien.
Read Guide →US Estate Tax Rules for Non-Residents
Non-Resident Aliens face a shocking $60,000 US estate tax exemption versus the $13.61M exemption available to US citizens.
Read Guide →How to Apply for an ITIN (Form W-7)
Step-by-step guide to obtaining an Individual Taxpayer Identification Number (ITIN) for H-4 holders, foreign investors, and non-work visa holders.
Read Guide →Non-Resident Withholding on Passive Income
How the IRS imposes 30% default withholding on US-source passive income paid to Non-Resident Aliens and how to claim treaty-reduced rates.
Read Guide →Child Tax Credit for Expats Abroad
How US expats and NRIs living abroad can claim the $2,000 Child Tax Credit and the Additional Child Tax Credit (ACTC) for qualifying children.
Read Guide →Avoiding State Tax Residency Audits
How aggressive states like California and New York pursue former residents for income tax after they claim to have moved out.
Read Guide →Getting an EIN as a Foreign Sole Proprietor
How foreign nationals and NRIs without an SSN can obtain an Employer Identification Number (EIN) from the IRS to operate a US business.
Read Guide →Form 1099 Reporting for Non-Residents
Why Non-Resident Aliens should receive Form 1042-S instead of 1099, and what to do if a US payer issues the wrong form.
Read Guide →Single-Member LLC Form 5472 Filing
Foreign nationals who own US single-member LLCs must file Form 5472 annually or face a $25,000 automatic penalty — one of the most commonly missed IRS requirements.
Read Guide →IRS Foreign Trust Reporting Rules
US persons who create, fund, or receive distributions from a foreign trust face severe annual reporting requirements and automatic penalties for missed filings.
Read Guide →Filing Jointly with a Non-Resident Spouse
H-1B holders can elect to file Married Filing Jointly with their H-4 spouse by making a 6013(g) election — but this makes the NRA spouse's worldwide income taxable in the US.
Read Guide →Section 7701(b) First-Year Choice Election
New US arrivals who don't meet the Substantial Presence Test in their first year can elect to be taxed as a resident for the full year — often saving significant taxes.
Read Guide →Claiming Tax Treaty Exemptions
How to use US tax treaties to reduce or eliminate withholding on dividends, interest, royalties, and personal service income — and how to properly disclose treaty positions.
Read Guide →FIRPTA Withholding Certificates
Foreign nationals selling US real estate face automatic 15% FIRPTA withholding on the full sale price — a withholding certificate reduces this to the actual tax owed.
Read Guide →Tax Treatment of Foreign Pension Rollovers
The IRS does not recognize most foreign pension plans (Indian EPF/PPF, UK SIPP, Australian Super) as tax-advantaged, creating complex US reporting and potential double taxation.
Read Guide →Understanding NRE vs NRO Accounts in India
The key differences between NRE (tax-free in India, fully repatriable) and NRO (taxed in India, limited repatriation) accounts — and their US tax and FBAR reporting obligations.
Read Guide →Taxation of FCNR Deposits for US Expats
FCNR deposits earn tax-free interest in India, but that interest is fully taxable in the US — here's how to report and minimize the tax impact.
Read Guide →US Tax Reporting of Canadian TFSAs
Tax-Free Savings Accounts (TFSAs) are completely tax-free in Canada — but the IRS treats them as foreign grantor trusts, requiring annual Form 3520-A filings and full taxation of gains.
Read Guide →RRSP Tax Deferrals for Canadian Expats
Unlike TFSAs, Canadian RRSPs enjoy favorable treatment under the US-Canada tax treaty — allowing US persons to defer US tax on RRSP income until withdrawal.
Read Guide →Australian Superannuation IRS Reporting
Australian superannuation is one of the most complex US tax reporting areas — classified as either a foreign pension, a grantor trust, or a PFIC depending on the fund structure.
Read Guide →UK Individual Savings Account (ISA) Reporting
UK ISAs are completely tax-free in Britain, but the IRS treats all ISA income as fully taxable — and ISAs holding non-US funds are likely PFICs requiring Form 8621.
Read Guide →Subpart F and GILTI Rules for Expat Owners
US shareholders who own 10%+ of a foreign corporation face 'phantom income' taxation under Subpart F and GILTI rules — even if no dividends are distributed.
Read Guide →Claiming Saver's Credit from Abroad
Lower-income US expats who contribute to a US IRA or 401(k) while abroad may qualify for the Saver's Credit — worth up to 50% of contributions.
Read Guide →Making Quarterly Estimated Tax Payments
Self-employed expats, freelancers, rental income earners, and those with significant investment income must make quarterly IRS estimated tax payments to avoid underpayment penalties.
Read Guide →IRS Streamlined Filing Compliance Procedures
NRIs who unknowingly missed years of FBAR and foreign income reporting can come into compliance with reduced penalties through the IRS Streamlined Program.
Read Guide →Filing Delinquent FBARs under Safe Harbor
If you properly reported all foreign income on your US tax returns but simply forgot to file the FBAR forms, the IRS Delinquent FBAR Submission Procedures may allow you to file late with zero penalty.
Read Guide →IRS Voluntary Disclosure Program (VDP)
For taxpayers who willfully concealed foreign accounts or income, the IRS Voluntary Disclosure Program is the only structured path to avoid criminal prosecution while coming into compliance.
Read Guide →Understanding the US Exit Tax
Renouncing US citizenship or abandoning a long-term green card triggers a mark-to-market exit tax if your net worth exceeds $2 million or your average tax bill exceeded $206,000 over the past 5 years.
Read Guide →Filing Form 8865 for Foreign Partnerships
US persons with a 10% or greater interest in a foreign partnership — including Indian LLPs, UK partnerships, and family business ventures — must file Form 8865 annually or face $10,000 automatic penalties.
Read Guide →Frequently Asked Questions
What is the difference between FBAR and FATCA?
FBAR (FinCEN 114) is filed electronically with the Treasury Department if foreign bank accounts exceed $10,000 at any point. FATCA (Form 8938) is filed with your IRS Form 1040 if foreign financial assets exceed higher thresholds ($50,000+).
How can NRIs lower TDS when selling property in India?
NRIs can apply for a Lower Deduction Certificate (Form 13) with the Income Tax Department of India before closing the sale to reduce TDS from 20.8% of the total sale price down to the actual capital gains tax liability.
How does Article 25 of the US-India DTAA eliminate double taxation?
Article 25 allows U.S. tax residents to claim an IRS Foreign Tax Credit (Form 1116) for income taxes paid to India on Indian-source income (such as rental income, capital gains, or bank interest), Dollar-for-Dollar reducing U.S. tax liability.
What is the penalty for failing to file FBAR (FinCEN Form 114)?
Non-willful failure to file FBAR carries a civil penalty of up to $10,000+ per violation (indexed for inflation). Willful failure carries penalties up to 50% of the account balance or $100,000, whichever is greater, plus potential criminal prosecution.
Are NRE account interest and NRO account interest taxable in the U.S.?
Yes. While interest earned on NRE (Non-Resident External) accounts is tax-exempt in India, U.S. tax residents must report global income, including all interest earned in both NRE and NRO accounts, on IRS Form 1040 Schedule B.
How do I obtain IRS Form 6166 (Tax Residency Certificate)?
U.S. residents can request Form 6166 by submitting IRS Form 8802 along with a $85 user fee. Form 6166 is submitted to Indian banks or income tax authorities to claim lower DTAA withholding rates (e.g. reducing 30% TDS on NRO interest to 15%).
• FinCEN BSA E-Filing System (FBAR): bsaefiling.fincen.treas.gov
• IRS Foreign Tax Credit (Form 1116): irs.gov/form1116
• VFS Global India OCI Portal: services.vfsglobal.com
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Pro Tax Tip
If you hold an NRO (Non-Resident Ordinary) account in India, interest income is subject to 30% TDS. By submitting your US tax residency certificate (Form 6166) and a DTAA declaration to your Indian bank, you can reduce this withholding tax rate to 15%.