As an Indian citizen or Indian-origin family living in the United States, you may wonder how to handle your income from India, especially if you have a salary, rental income, or interest from bank accounts back home. Understanding the tax implications of your worldwide income is crucial for compliance with US tax laws.

Who Needs to Report Worldwide Income?

If you are classified as a 'US person,' you are required to report your worldwide income to the IRS. This classification includes US citizens, green card holders, and anyone who meets the substantial presence test. For instance, if you are living in the USA on a work visa such as an H-1B, you may be considered a US tax resident. As a US tax resident, you are taxed on all income earned, whether it is from the United States or abroad, including your earnings from India.

What Types of Income Must Be Reported?

As a US tax resident, you need to report various types of income from India, including:

  • Salary from your job in India
  • Rental income from properties you own in India
  • Interest earned from Indian bank accounts
  • Dividends and capital gains from investments

It’s important to note that you must report this income even if it has already been taxed in India or if you have not transferred it to the United States. All income should be reported in US dollars, so you will need to convert it using an acceptable exchange rate.

Understanding FBAR Requirements

If you have foreign financial accounts, you may also need to file the FBAR (FinCEN Form 114). This requirement applies if the aggregate balance of all your foreign accounts exceeds $10,000 at any point during the calendar year. The key point here is that it is the combined peak balance across all accounts, not the year-end balance or the balance of individual accounts that counts.

The FBAR is filed electronically through the FinCEN BSA E-Filing System and is separate from your federal tax return. The deadline for filing the FBAR aligns with your tax return due date in April, but there is an automatic extension to October, meaning you do not need to request an extension.

Next Steps: How to Proceed

To ensure you comply with US tax laws regarding your worldwide income, here are some concrete steps you can take:

  • Gather all documentation related to your income from India, including payslips, rental agreements, and bank statements.
  • Convert your income to US dollars using an acceptable exchange rate for accurate reporting.
  • Determine if you need to file the FBAR based on your foreign account balances.
  • Consult with a tax professional if you have questions or need assistance with your tax filings.

By taking these steps, you can navigate your tax obligations with confidence and ensure compliance with both US and Indian financial rules.

Before you act on this

This article is general information for the Indian community in the United States, not tax or legal advice. Thresholds, penalty amounts and filing dates are set by the IRS and FinCEN and are adjusted over time, so confirm the current year's figures before you rely on them. Your own position depends on your visa status, residency and the specific accounts you hold — speak to a qualified cross-border tax professional before filing or making a decision.