NRI Tax Filing Basics: Your Real US Tax Status

If you’ve searched “NRI tax filing” while living in the US, start here: “NRI” isn’t a US tax category at all. It’s an Indian one, defined by how many days you spend inside India each financial year. What the IRS actually cares about is a separate test, the Substantial Presence Test, and passing it means the US taxes your worldwide income, not just what you earn domestically. Most of the confusion, and most of the compliance mistakes, come from treating these two systems as if they’re the same thing.

The Substantial Presence Test, in actual numbers

The IRS decides whether you’re a resident alien (taxed like a US citizen, on worldwide income) or a nonresident alien (taxed only on US-source income) using a formula in IRS Publication 519. You pass, and become a resident alien for tax purposes, if both of these are true:

1. You were physically present in the US for at least 31 days during the current year, and
2. The weighted sum below is 183 or more:

(days in current year × 1) + (days in prior year × 1/3) + (days in year before that × 1/6)

Worked example: an H1B holder who was in the US for 300 days in 2025, 310 days in 2024, and 305 days in 2023:

300 + (310 ÷ 3) + (305 ÷ 6)
= 300 + 103.3 + 50.8
= 454.1

454.1 clears 183 with plenty of room, and 300 days clears the 31-day floor, so this person is a resident alien for US tax purposes. That’s true regardless of visa type, regardless of whether they also qualify as an NRI under India’s rules, and regardless of any intent to eventually move back.

Exception that trips people up: exempt individuals. F-1 and J-1 students generally don’t count their days toward the Substantial Presence Test for their first 5 calendar years in the US, subject to the applicable rules and filing obligations. They may need to file Form 8843; students with income may also need a Form 1040-NR. J-1 teachers and researchers generally have a similar carve-out for 2 calendar years. Someone on F-1 who changes to H-1B mid-year needs to determine which days count for that transition year; the specific result depends on the person’s status history and circumstances.

What resident alien status actually triggers

Once you clear the Substantial Presence Test, three separate reporting obligations kick in, and treating them as one thing is where most mistakes happen.

1. Form 1040, worldwide income. Your Indian rental income, NRO account interest, and capital gains from Indian mutual funds or stocks all go on your US return, not just your US salary. The US-India tax treaty exists specifically to prevent double taxation on the same income. Indian tax you’ve already paid, like TDS withheld on NRO interest, generally becomes a Foreign Tax Credit via Form 1116, offsetting your US tax liability dollar-for-dollar up to certain limits. Skip the credit and you end up paying full tax to both countries on the same dollars.

2. FBAR (FinCEN Form 114). If the aggregate maximum value of your reportable foreign financial accounts exceeded $10,000 at any point during the calendar year, you generally must file FBAR. It’s filed separately from your tax return, through FinCEN’s BSA e-filing system, due April 15 with an automatic extension to October 15. Civil penalty amounts are adjusted for inflation and depend on the facts. For penalties assessed on or after January 17, 2025, the maximum non-willful penalty is $16,536, subject to a reasonable-cause exception; the Supreme Court has held (Bittner v. United States, 2023) the statutory cap applies per annual FBAR report, not per account. The willful maximum is adjusted for inflation and can be the greater of $165,353 or 50% of the account balance (current penalty table).

3. FATCA (Form 8938). A separate, higher-threshold reporting requirement attached to your actual tax return. For a single filer living in the US, the threshold is foreign assets exceeding $50,000 on the last day of the year, or $75,000 at any point during the year (these thresholds roughly double if you’re married filing jointly, and go higher still if you’re living abroad — confirm current figures on the IRS FATCA page before filing, since these numbers do get revisited). FBAR and FATCA overlap in what they cover but are legally distinct filings with different penalty regimes. Filing one doesn’t satisfy the other.

The PFIC problem hiding inside Indian mutual funds

This is a common cross-border issue, but the exact treatment depends on the fund. A foreign corporation may be a Passive Foreign Investment Company (PFIC) if it meets the statutory income or asset test; some Indian mutual funds may qualify. Form 8621 reporting and the default section 1291 rules may apply. Under those rules, certain excess distributions and gains on disposition can be allocated over the holding period and subject to tax and an interest charge. A QEF election generally requires fund information, while a mark-to-market election is limited to qualifying marketable stock. Election timing and late-election relief are technical; see the IRS Form 8621 instructions and have a CPA experienced in PFICs review the specific fund and your history before buying, selling, or filing.

Which filing status applies to you

The Substantial Presence Test math above is exact, but it’s rarely the whole story. Treaty tie-breaker rules, dual-status years (the year you cross from nonresident to resident), and first-year choice elections all layer on top of it. Run your actual day counts through the tool below to see where you land, then use that as the starting point for a conversation with a CPA who works with cross-border filers specifically.

Once you know your filing status, cost of living planning and remittance strategy both get a lot more concrete. Worth reading next if either move is on your radar.