Tax Filing Guide for US NRIs: Key Rules, Forms, and Deadlines

 For Non-Resident Indians (NRIs) in the US, tax filing can be challenging due to obligations in both India and the US. Understanding residency rules, reporting requirements, and tax-saving strategies can help ensure compliance while minimizing tax liabilities. 

This blog provides a step-by-step Tax filling guide for us nri.

1. Determining Your Tax Residency Status

The IRS uses the Substantial Presence Test (SPT) to determine if you are a tax resident in the US:

  • You are considered a US tax resident if you have been in the country for 183 days or more in the current year.
  • If you were present in the US for at least 31 days this year and a total of 183 days over the last three years (calculated as Current Year days + 1/3 of previous year days + 1/6 of the year before that), you may still be classified as a resident.

Resident vs. Non-Resident Taxation

  • US tax residents: Must report global income (including income earned in India).
  • Non-residents (NRAs): Only need to report and pay taxes on US-sourced income (such as investments, property rentals, or salary earned in the US).

2. Tax Filing Requirements for US NRIs

Forms Required for Tax Filing

  1. Form 1040 (for US tax residents).
  2. Form 1040-NR (for non-resident aliens).

Additional Compliance Requirements

  1. FBAR (Foreign Bank Account Report) – FinCEN Form 114

    • Required if the total balance in foreign (Indian) bank accounts exceeds $10,000 at any time during the year.

  2. FATCA (Foreign Account Tax Compliance Act) – Form 8938

    • Required if total foreign financial assets exceed $50,000 (single) or $100,000 (married filing jointly).

  3. Reporting Indian Income

    • NRIs must report interest income, rental income, dividends, and capital gains from Indian assets.
    • The Foreign Tax Credit (FTC) helps prevent double taxation.

3. How to Avoid Double Taxation (DTAA Benefits)

India and the US have a Double Taxation Avoidance Agreement (DTAA) to prevent NRIs from paying taxes on the same income twice.

Ways to Claim DTAA Benefits

  • Foreign Tax Credit (Form 1116): Claim a credit for taxes paid in India to reduce US tax liability.
  • Tax Exemptions: Certain income types, such as pensions or interest, may be exempt under DTAA.
  • Lower Withholding Tax Rates: Dividends, royalties, and capital gains may be taxed at reduced rates.

4. Important Tax Deadlines for US NRIs

  • April 15: Standard US tax filing deadline.
  • June 15: Automatic extension for NRIs living abroad.
  • October 15: Final extension deadline if requested.
  • FBAR Filing (April 15, extended to October 15 if necessary).

5. Common Tax Filing Mistakes to Avoid

  • Not Reporting Indian Income: Even if tax is paid in India, NRIs must declare it in the US.
  • Ignoring FBAR/FATCA Rules: Failing to disclose foreign assets can result in heavy fines.
  • Not Using DTAA Benefits: Claiming Foreign Tax Credits reduces double taxation.
  • Missing Deadlines: Late filings result in penalties and interest charges.

6. How to File Taxes as a US NRI

NRIs can file their taxes through:

  1. IRS e-file or online tax software (TurboTax, H&R Block).
  2. A tax professional specializing in NRI taxation to ensure compliance with US and Indian tax laws.

Final Thoughts

Filing taxes as a US NRI requires careful attention to residency rules, foreign income reporting, and DTAA benefits. Staying compliant with IRS regulations helps avoid penalties and optimizes tax savings.

For expert assistance with NRI tax filing, consult Dinesh Aarjav & Associates today!

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