H-1B holders: US tax residency and Indian residency in the same year

Is this you? You moved to the US on an H-1B, or switched to it from F-1, and need your first US return or your Indian return for the year you left. H-4 spouses are tested the same way.

This assumes your residency status is changing: part-year in the US, and decided by your days in India. Moving back this year? Check your residency status first, because the answer can change.

Two countries, two calendars

The US decides residency for each calendar year. India decides it for each tax year, 1 April to 31 March. A single flight in September or February therefore touches two US years and two Indian years, each judged on its own.

The tests are unrelated too. The US counts weighted days in the US over three calendar years; India counts days in India in its tax year, and sometimes the four before. Neither asks what the other decided. So you can be a US resident from your arrival day while India still treats you as resident for the whole year you left, which is the overlap this guide is about.

India’s new Income-tax Act, 2025 applies from tax year 2026-27. Tax year 2025-26 is still decided under the Income-tax Act, 1961, which the new Act keeps alive for earlier years (2025 Act, section 536). The tax department’s non-resident FAQ confirms that residence for tax years starting before April 1, 2026 is decided under the old section 6, on the same conditions. So for a 2025 move, the old Act decides the year you leave.

The US side: when an H-1B makes you a resident

The substantial presence test

Unless you hold a green card, you’re a US tax resident for a calendar year if you meet the substantial presence test. You need at least 31 days in the US that year, and a total of 183 days or more when you add this year’s days, a third of last year’s and a sixth of the year before’s. Fractions aren’t rounded, and any part of a day in the US counts as a day.

H-1B days always count. Students, teachers and trainees can be “exempt individuals” whose days are left out. H-1B is never exempt, and nor is H-4, so every day on either counts from the first.

F-1 and OPT years before the H-1B

If you came as a student, your F-1 days don’t count while you’re an exempt student. That lasts while you keep substantially to your visa’s terms (unauthorised work breaks it) and only for 5 years: any part of a calendar year uses up a whole one. After that, the days count unless you can show you don’t intend to live in the US permanently, and steps towards a green card count against you.

Time on OPT or STEM OPT is part of F-1 status, so those days are exempt too, as long as you kept to the OPT rules. If you’re not sure you stayed in status, for example after a long gap without work, check it with a CPA.

Exempt days still have to be reported. You file Form 8843 for each exempt year, with your nonresident return or on its own by that return’s due date. Without it, the IRS can count the days unless you show clear and convincing evidence that you tried to comply. Exemption ends on the day your H-1B status takes effect, and your days count from then.

Your residency starting date

Your residency doesn’t start on the day your count reaches 183 days. It starts on the first day you’re present in the US in the calendar year you meet it. If you were resident the year before, it starts on 1 January.

So a week of onboarding in January before moving in March can start your residency in January. A rule lets you disregard up to 10 days of earlier presence for the start date, if you can show your tax home and your closer ties were still abroad during those days. You must leave out a whole trip or none of it, the days still count towards the 183 days, and you need a signed statement with your return.

The first-year choice, for a late arrival

Arrive late in the year and you usually can’t reach 183 days by 31 December. You can instead choose to be a resident from your arrival if all of these are true:

1. You weren’t a US resident in that year or the year beforeNot by green card and not by the day test.
2. You were here for 31 days in a row in the arrival yearYour residency then starts on the first day of that run.
3. You were here for 75% of the days from the start of that run to 31 DecemberUp to 5 days away count as days here, for this part only.
4. You meet the substantial presence test for the following yearYou can’t make the choice until you’ve actually met it.

That last condition sets the timing. You make the choice in a statement attached to your Form 1040 for the arrival year, and you can’t file it before you pass the next year’s test, which for most people is around mid-year. So you extend: file Form 4868 by the regular due date (for 2025 returns, April 15, 2026) and pay with it the tax you’d owe as a nonresident for the whole year. The extended deadline for 2025 returns is October 15, 2026. Skip the procedure and you’re a nonresident for the arrival year, unless you can show clear and convincing evidence of reasonable steps to comply. Once made, the choice can’t be revoked without the IRS’s consent.

The choice isn’t free: from your starting date, Indian interest and rent you receive are US-taxable and your Indian accounts enter the foreign-account reports. Its main use is to open the joint-return election below.

What a dual-status return can’t do

A year that’s part nonresident, part resident is a dual-status year. If you’re resident on 31 December, you file Form 1040 marked “Dual-Status Return”, with a statement on Form 1040-NR for the nonresident part. Only the resident part reports worldwide income. You can’t take the standard deduction (you may itemize), can’t use head-of-household rates and can’t file jointly, and the IRS says dual-status returns for 2025 can’t be e-filed. Credits, including the foreign tax credit, generally follow the rules for residents.

Joint returns with an H-4 spouse

Two elections let a married couple file jointly as full-year residents instead. If you were both nonresidents on 1 January and both residents on 31 December, as an H-1B and H-4 arriving together early in the year usually are, you can both elect to be residents for the whole year; it’s a once-only election. If only one of you is resident at the year end, you can both elect to treat the other as resident, and that election carries into later years until ended.

Either way you get the standard deduction and joint rates back, but you’re both taxed on worldwide income for the whole year, including Indian salary from before you left (with credit for the Indian tax), and neither of you can use the treaty to claim you’re not a US resident. Whether a late arrival can combine the first-year choice with the first election isn’t addressed in the IRS’s guide; the law’s wording seems to allow it, but it’s untested.

The closer-connection exception on Form 8840 rarely helps an H-1B worker: it needs fewer than 183 days here in the current year, a tax home abroad all year, and no green card steps, such as an I-140 petition or labour certification filed for you.

The India side: the year you leave

The Indian rules are covered in full in our guide to residency status in India; here’s how they apply to an H-1B move.

You’re resident in India for a tax year if you spend 182 days or more there, or 60 days or more plus 365 days over the previous four years 2025 Act s. 6(2)-(5)was s. 6(1). Otherwise you’re a non-resident, an NRI in everyday terms. In the year an Indian citizen leaves India for employment abroad, the second test is switched off: only the 182 days test counts. An H-1B job is the clear case. It covers only citizens, and only the year you leave. After that, the visiting rule applies: 182 days, or 120 days with the four-year condition if your Indian income is above ₹15 lakh.

Count the day you fly out as a day in India: it’s the cautious reading of an unsettled point, explained in how to count your days. And India has no split year: if you’re resident, it’s for the whole April–March year, so your US salary for the rest of it is in your Indian return too.

If you’ve lived in India all along, a resident year is also an ordinarily resident one. The in-between RNOR status needs years abroad behind you, so it rarely helps a first-time leaver.

Deemed residence rarely catches an H-1B holder. An Indian citizen with Indian income above ₹15 lakh who isn’t liable to tax anywhere else because of residence or domicile is treated as resident 2025 Act s. 6(7)-(8)was s. 6(1A). As a US resident you’re liable to US tax by residence, so it shouldn’t reach you. The grey patch is a move year in which you’re a US nonresident, taxed only on US income, for most of the Indian year, and your Indian salary before leaving passes the threshold. The department hasn’t said whether source-only tax is enough; see our guide to deemed residence. Even then, a deemed resident is always not ordinarily resident, so US salary paid abroad stays outside Indian tax.

Three worked examples

Each example counts days at both ends and assumes no other trips.

When both countries treat you as resident

The India–US treaty settles which country you’re a resident of for the treaty, in order: where you have a permanent home; if both, where your personal and economic ties are closer; then where you usually live; then nationality; failing all of those, the two tax authorities agree it between them. It doesn’t change your status under either country’s own law, and in India you rely on the treaty only where it’s more beneficial than the Act 2025 Act s. 159was s. 90. This is the DTAA tie-breaker most NRIs hear about.

Three limits make it less useful than it sounds for an H-1B holder:

• It doesn’t move your paycheck. Pay for work done in the US can be taxed by the US whichever country you’re treaty-resident in. The tie-breaker mainly affects other income, and which country gives the credit.
• Its effect on part of a year is unsettled. The treaty doesn’t say whether you test the whole Indian year or only the overlap weeks. Shreya, with a family home in India until February and a Dallas lease after, could argue either way.
• On the US side, it changes your tax and little else. Claim Indian residence under the treaty and you file Form 1040-NR with Form 8833, taxed as a nonresident. For every other purpose you stay a US resident, on the same dates. The IRS’s FBAR guide says tax treaties don’t affect FBAR filing. Form 8938 is different: you can leave it out for the period the nonresident return covers, if you file that return and the disclosure on time.

For most people in Shreya’s position, the simpler route is the one the treaty itself provides: pay both and take the credit.

Avoiding double tax in the overlap

In India, a resident claims credit for the US tax on the overlap salary under the treaty. Tax withheld from your US pay counts, up to the Indian tax on that income. You file a statement of foreign income and tax, Form 44 (was Form 67). For 2025-26 that’s still the older form under the 1962 Rules; the newer one, under rule 76 of the 2026 Rules, starts with 2026-27. Only residents can claim the credit.

In the US, Indian tax on Indian-source income that the US also taxes goes on Form 1116, limited to the US tax on that foreign income. Pay for work done in the US is US-source, so it never creates US credit room. Our guide to claiming Indian tax as a US credit, line by line, is Coming soon.

If you missed the original Indian deadline for 2025-26, a late return is still possible until December 31, 2026. File the foreign tax credit statement before the return, and have a CA check a late claim: the department’s own FAQ still ties the statement to the original due date.

Your Indian bank accounts in the move year

Indian foreign-exchange law (FEMA) has its own residence test, and it isn’t the tax test. Under the RBI’s directions, when a resident becomes a person resident outside India, which on the usual reading of FEMA happens when you leave for a job abroad, the existing savings account should be redesignated as an NRO account. Banks usually do it once you tell them. So Shreya’s accounts should become NRO in February 2026 even though she files as a resident for 2025-26.

What to do with each account after that, and when an NRE or FCNR account suits better, is in our guide to Indian bank accounts from abroad.

From your US residency starting date, your Indian accounts are foreign accounts: above USD 10,000 combined at any time, you owe an FBAR. Whether a part-year resident tests the whole calendar year or only the resident months isn’t settled, and nor is the timing when you make the first-year choice after the FBAR date; our guide to the FBAR deadline on an H-1B gives the cautious course. The 2025 FBAR is due October 15, 2026, and the 2026 one October 15, 2027. Form 8938 covers only the part of the year from your starting date.

Which Indian accounts count, from NRE deposits to PPF, is set out in FBAR and FATCA reporting for Indian accounts.

A checklist for the move year

1. Before you flyCount your days in India this tax year against 182 days; a few days can decide whether India taxes your first months of US pay. Keep your offer letter as proof you left for a job.
2. The day you leaveTell your bank, and have savings accounts redesignated as NRO. If you can, get the final settlement paid before you go.
   India
3. Your first US dayNote it, and any earlier US trips that year, or the day your H-1B status took effect if you were on F-1.
   US
4. 31 DecemberCheck the substantial presence test. Record your highest and year-end Indian balances.
   US
5. 31 MarchIndia’s year ends. Make your final day count and decide your Indian status for the year.
   India
6. US return due dateFile, or extend on Form 4868. Extend if you plan the first-year choice, and pay as a nonresident with the extension.
   April 15, 2027 for 2026
7. Indian return due dateFile as a resident or non-resident. If resident, include the overlap salary and the foreign tax credit statement.
   July 31, 2027 for 2026-27
8. Extended US and FBAR dateFile the extended return and the FBAR.
   October 15, 2027 for 2026