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Moving to India changes your day-to-day residence, but it does not automatically end every Indian or US tax obligation. Your Indian income-tax residence is calculated separately for each tax year; your FEMA status controls several banking and foreign-exchange matters; and US citizenship or a valid green card can preserve US filing duties after the move.
Before changing accounts, selling investments or skipping a return, map your travel dates, Indian residence history, immigration status, income sources and foreign accounts for the exact tax year. The rules below are a planning framework, not an individual tax conclusion.
Start with three separate questions
Returning families often use “resident” as if it were one status. It is not. Make three independent determinations:
| Question | What it controls | Why the distinction matters |
|---|---|---|
| Are you resident in India for income-tax purposes? | Which Indian tax rules and income scope apply for that tax year. | The answer depends on days in India, prior-year presence and special statutory rules. |
| Are you resident in India under FEMA? | How Indian banks classify NRE, NRO, RFC and related accounts and transactions. | FEMA residence and income-tax residence use different tests and can change at different times. |
| Are you a US citizen or still a US tax resident? | US income-tax and information-return obligations. | US citizenship generally keeps worldwide-income filing in place; a green-card holder must properly end that status or establish another legal position. |
Run all three analyses for the same calendar period, but do not substitute one result for another. A bank may ask for a FEMA-status update even while your Indian tax classification for the year is still being calculated.
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Calculate Indian income-tax residence for the specific tax year
Indian residence is determined for each previous year. Do not count only from the date you decided that the move was permanent. Count your physical presence in India and apply the rule that was in force for that year.
The basic day-count tests
For the framework described by the Income Tax Department for assessment year 2026–27, an individual is generally resident if either condition is met:
- You were in India for 182 days or more during the relevant previous year; or
- You were in India for at least 60 days during that year and at least 365 days in total during the four preceding years.
Use arrival and departure dates consistently and retain travel records. A one-day difference can change the result when you are near a threshold.
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Special rules for visitors and people leaving India
The 1961 Act guidance contains exceptions for an Indian citizen or person of Indian origin visiting India and for an Indian citizen leaving India for employment overseas. In a specified visiting-person case, where Indian income (excluding foreign-source income) exceeds ₹15 lakh, the 60-day threshold is replaced by 120 days. These are fact-sensitive provisions: citizenship or origin, the purpose of travel, Indian income and the exact year all matter.
The same guidance describes a deemed-resident rule for certain Indian citizens with Indian income above ₹15 lakh who are not liable to tax in another country. Being physically outside India therefore does not, by itself, settle the question.
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Which Indian tax law applies?
The Income Tax Department’s Income-tax Act, 2025 FAQ says the new Act applies from 1 April 2026, while earlier tax years continue under the Income-tax Act, 1961. In practice, identify the previous year and assessment year first, then use the residence tests, forms and deadlines prescribed for that period. Confirm the applicable law and return instructions before filing because transition terminology and forms can change.
Test RNOR instead of assuming it
After establishing that you are resident, determine whether you are “resident but not ordinarily resident” (RNOR). The Income Tax Department’s FAQ describes two historical gateways: you were non-resident in at least nine of the ten preceding years, or you were in India for 729 days or fewer during the seven preceding years. Calculate both tests from your actual history for the relevant year.
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1Scan for outdated or missing drivers - takes under a minute2Repair Windows errors before they cause bigger problems3Fix the driver behind crashes, sound loss and screen glitchesRNOR is not a general tax holiday. Its effect depends on the statutory rules and on the character and source of each income item. Foreign salary, investment income, pensions, deferred compensation, equity awards, trusts and business interests can have different sourcing and realization issues. The available official summaries do not decide every such item, so document the facts and obtain advice where timing or classification is unclear.
Understand what the US move does—and does not—end
US citizens
The IRS states that a US citizen living and working abroad generally continues to file a US income-tax return and report worldwide income. Living in India for a year does not automatically remove that filing obligation. A foreign earned income exclusion or foreign tax credit may reduce double taxation when the statutory requirements are met, but neither is a blanket exemption from filing.
Green-card holders
A lawful permanent resident generally remains in the US tax regime until the status is properly abandoned or another legal rule applies. Keep evidence of any abandonment filing, immigration decision or other status change. Do not treat an overseas move, an expired card or an intention not to return as conclusive by itself.
Foreign earned income exclusion: do not rely on the calendar alone
The IRS bona fide residence test requires residence in a foreign country for an uninterrupted period that includes an entire tax year and depends on the facts. Other eligibility tests may apply. Merely spending 12 months in India does not automatically qualify you. Check the applicable tax-year instructions and coordinate the exclusion with any foreign tax-credit calculation.
Keep FBAR, Form 8938 and income-tax returns separate
Foreign-account reporting is a second US compliance track, not a substitute for an income-tax return.
| Filing or record | Filed with | What to check |
|---|---|---|
| US income-tax return | Internal Revenue Service | Worldwide income, deductions, credits and any required international schedules. |
| FBAR (FinCEN Form 114) | Financial Crimes Enforcement Network, separately from the tax return | Whether you are a US person with reportable foreign financial accounts and whether the current aggregate-value test is met. |
| Form 8938 | Attached to the US income-tax return | Specified foreign financial assets, filing status, tax-home location and the applicable value thresholds. |
Do not merge FBAR and Form 8938. Definitions, thresholds, filing systems and exceptions differ, and one filing may be required even when the other is not.
Form 8938 thresholds for certain taxpayers living abroad
The IRS instructions for Form 8938 (11/2021) list these thresholds for specified individuals whose tax home is abroad and who meet the applicable presence test:
| Filing status | Value on the last day of the year | Value at any time during the year |
|---|---|---|
| Unmarried | More than $200,000 | More than $300,000 |
| Married filing jointly | More than $400,000 | More than $600,000 |
| Married filing separately | More than $200,000 | More than $300,000 |
Those figures come from the cited 2021 instructions; verify the current-year Form 8938 instructions before relying on them. The FBAR test is different and must be checked under current FinCEN guidance.
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Use treaty relief carefully
The United States–India income-tax treaty allocates taxing rights by income category and residence; it is not a blanket exemption in either country. The relevant article, your residence under domestic law and the type and source of income all matter.
US treaties commonly contain a saving clause preserving a country’s right to tax its citizens and residents, subject to specified exceptions. A green-card holder who claims treaty residence in India may have a tie-breaker position in some circumstances and may need Form 8833. That position can affect both tax and disclosure. A treaty claim does not automatically cancel a US return, Indian return, FBAR or Form 8938.
Coordinate foreign tax credits, treaty articles and any exclusion rather than claiming each independently. Keep the computations showing which income was taxed, in which country, and in which year.
Update Indian bank accounts when your return indicates an intention to stay
NRE accounts
Reserve Bank of India guidance says that a returning account holder who intends to remain in India for an uncertain period should have NRE accounts redesignated as resident accounts or, if eligible, transfer funds to Resident Foreign Currency (RFC) accounts. Ask the bank about the effective date, interest treatment, tax documentation and any deposit maturity that falls near the move.
NRO accounts
NRO accounts may be redesignated as resident rupee accounts. The bank will set its documentation and timing requirements, so contact each institution rather than assuming that one update covers all accounts.
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FCNR(B) deposits
RBI material describes FCNR(B) deposits continuing to maturity in specified circumstances. After maturity, the bank can convert or otherwise handle the funds as permitted, at the account holder’s option. Review the deposit contract, maturity date, currency exposure and reinvestment choice before changing instructions.
What to take to the bank
- Passport, proof of Indian address and the bank’s residency-status form.
- Travel and immigration evidence supporting the date your status changed.
- Details of every joint holder, nominee, power-of-attorney holder and beneficial owner.
- Statements and tax records needed to identify interest, withholding and principal.
Foreign assets generally do not have to be liquidated on return
RBI clarification says a person resident in India may hold, own, transfer or invest in foreign currency, foreign securities or foreign immovable property acquired, held or owned while that person was resident outside India, or inherited from a person resident outside India. The stated framework also says income and sale proceeds do not automatically have to be repatriated.
This is FEMA guidance, not a tax exemption. Indian reporting, tax on income or gains, US reporting and local-law restrictions can still apply. Verify the current FEMA rule for the particular asset and transaction before selling, gifting, remitting or restructuring it.
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- Acquisition date, purchase price and currency for each investment or property.
- Brokerage, bank and retirement-account statements at the move date and year end.
- Evidence showing whether an asset was acquired while you were non-resident or inherited from a non-resident.
- Records of dividends, interest, rent, sale proceeds, withholding and foreign taxes paid.
- Account numbers and authority details for accounts you own, jointly hold or can sign on.
A practical year-of-return workflow
- Create a travel ledger. List every day in India for the relevant previous year and the preceding four and seven-year periods used by the applicable tests.
- Record status facts. Note citizenship, PIO or OCI position, green-card status, immigration filings, overseas employment and the date you intended to remain in India.
- Classify income. Separate Indian salary or business income, US wages, investment income, rent, pensions, equity compensation and deferred payments by source and realization date.
- Run Indian residence and RNOR tests. Apply the law for that tax year, then determine the scope of income that must be reported.
- Run the US analysis. Determine whether citizenship or a green card keeps you in the US filing regime, then test exclusions, credits and treaty positions.
- Inventory foreign accounts. Check FBAR and Form 8938 independently, including accounts over which you have signature authority or beneficial ownership.
- Contact every Indian bank. Redesignate NRE and NRO accounts as required, review FCNR(B) maturities and update nominees and addresses.
- Reconcile records. Tie bank statements, broker reports, tax forms, exchange rates and withholding certificates to each return.
- Obtain specialist review for complex items. Use a cross-border adviser when you have trusts, private-company interests, equity awards, business operations, large property transactions or a treaty tie-breaker claim.
Common mistakes and how to avoid them
- “I moved permanently, so I became resident on moving day.” Residence is a tax-year calculation, not a label chosen on the moving date.
- “RNOR means foreign income is never taxable.” RNOR treatment depends on the year and the income’s character and source.
- “I paid Indian tax, so I can skip the US return.” US citizens and many green-card holders still have filing and information-reporting duties.
- “FBAR and Form 8938 are the same form.” They are separate filings with different tests.
- “Returning means every foreign account must be closed.” RBI guidance may permit continued ownership, but Indian tax and US reporting still need review.
- “The bank will update everything automatically.” Each bank may require separate forms, evidence, nominee changes and instructions for maturing deposits.
- “A treaty eliminates double filing.” Treaty relief can change taxing rights or reduce tax, while returns and disclosures may still be required.
When professional advice is worth the cost
Get India–US cross-border advice before filing when the move overlaps with a green-card surrender, a treaty tie-breaker, stock options or restricted stock, retirement accounts, trusts, a privately held business, foreign real estate, a large remittance, a gift or a sale soon after arrival. Give the adviser your travel ledger, immigration history, account inventory and acquisition records. A professional can then test the exact year rather than offering a generic “returning NRI” answer.
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