NRI Tax 101: Residency, FBAR and FATCA Without the Jargon

Your residency status decides everything

The IRS taxes 'resident aliens' on worldwide income, and non-residents only on US income. Residency is determined by the green-card test or the substantial-presence test (a day-count formula across three years). Many first-year arrivals are 'dual-status' — the year you land often needs professional help.

FBAR — report foreign accounts over $10,000

If the combined value of your non-US financial accounts (savings, FDs, PPF, demat) exceeded $10,000 at any point in the year, you must file an FBAR (FinCEN Form 114) — separate from your tax return, filed online, penalties for missing it are severe.

FATCA — Form 8938 with your return

FATCA reporting (Form 8938) attaches to your tax return and kicks in at higher thresholds (starting at $50,000 for single filers living in the US). It overlaps FBAR but does not replace it — many filers need both.

The common NRI mistakes

Ignoring Indian interest income: FD and savings interest is taxable in the US for resident aliens, even if TDS was deducted in India — the India–US treaty and foreign tax credits prevent double taxation, but only if you report.

Mutual funds: Indian mutual funds can be treated as PFICs — a punitive US tax regime. Get advice before you sell, or ideally before you land.

Missing state taxes: your state may have its own rules and no treaty relief.