(PUNE, INDIA) A growing number of Indian parents holding Overseas Citizen of India (OCI) cards are discovering that once they receive a U.S. Green Card through their U.S.-born children, they are treated as U.S. tax residents and must report worldwide income to the Internal Revenue Service, even if they live in India full-time. The issue has sharpened this year as families in cities like Pune, Mumbai, and Hyderabad ask whether Indian residency or OCI status shields parents from U.S. tax filing when their daily life remains in India. It does not.
The requirement flows from long-standing U.S. rules that attach tax status to permanent residency, not physical presence. Tax professionals say the confusion stems from mixing immigration categories with tax rules across two countries.
OCI versus U.S. tax status
- OCI is an Indian immigration benefit that eases long-term travel and certain rights in India, but it does not override U.S. tax law once someone becomes a U.S. permanent resident.
- Under U.S. law, a Green Card holder must file a U.S. individual return each year and report global income, including rents, bank interest, pensions, and investment gains arising in India.
- That obligation remains even for retirees who spend the entire year outside the United States.
Filing obligations and key forms
- A Green Card holder who lives in India is expected to file Form 1040 annually and disclose foreign financial accounts when thresholds apply. The IRS explains the annual filing duty on its page: About Form 1040.
- If combined foreign accounts exceed $10,000 at any point in a calendar year, the FBAR must be submitted electronically through FinCEN. See: Report Foreign Bank and Financial Accounts.
- U.S. FATCA rules can require Form 8938 when foreign assets cross specific thresholds, beginning at $200,000 for single filers living abroad. See: About Form 8938.
A common household example
- A frequently cited case: a retired parent in Pune with an OCI card lists an Indian address and has no U.S. wages after receiving a Green Card through a U.S. citizen child.
- Example: Sunita, a Pune resident, earns about ₹3 lakh from rent and ₹2 lakh from bank interest each year. Even though she lives in India and pays Indian tax on that income, she must report both items on her U.S. return as worldwide income.
- Depending on Indian taxes paid, U.S. liability may drop after claiming foreign tax credits, but the filing obligation itself does not disappear.
Dual filing, double tax concerns, and treaty relief
- Indian tax residency rules are separate: Indian law considers a person a resident for tax purposes if they spend 182 days or more in India during the financial year.
- Many retired Green Card holders in India end up filing in both countries. Dual filing does not automatically mean double tax.
- The India–U.S. tax treaty allows credits that can reduce or eliminate extra U.S. tax on the same income, but claiming those credits requires careful reporting and appropriate forms tied back to the U.S. return.
- Families who skip U.S. filing risk penalties and potential questions during immigration processing.
Immigration consequences and compliance risks
- Tax noncompliance can spill into immigration risk. While tax code and immigration law are separate, a pattern of failing to file U.S. returns as a Green Card holder can draw attention during travel or later applications.
- People report being asked about tax filing during interviews for benefits. Attorneys note a record of compliance supports clean re-entry and future filings.
- The concern is especially relevant for those considering naturalization, where good moral character and adherence to laws are reviewed.
- Many attorneys urge Green Card holders living abroad to keep filings current even when they owe little or nothing after credits.
Ending U.S. permanent residence: Form I-407
- Holding an OCI card does not exempt a Green Card holder from U.S. tax obligations. This is a common misconception.
- If a parent decides to settle in India for good and end U.S. tax residency, practitioners recommend formally surrendering the Green Card by filing Form I-407.
- USCIS explains how to document that decision on its page: Form I-407, Record of Abandonment of Lawful Permanent Resident Status.
Warnings and considerations:
– Long-term permanent residents may face exit tax rules in certain circumstances.
– Seek cross-border advice before filing Form I-407.
– Once Form I-407 is accepted and the person is no longer a permanent resident, they are generally not treated as a U.S. tax resident going forward.
– Simply carrying an OCI card or having an Indian address is not sufficient to end U.S. tax residency—formal surrender of the Green Card is required.
Foreign account reporting: FBAR and FATCA details
- Many Green Card holders in India maintain savings accounts, fixed deposits, or joint family accounts.
- If total foreign accounts top $10,000 at any time during the year, the FBAR must be filed—even if individual accounts are small or held jointly.
- FATCA (Form 8938) adds another layer when asset thresholds are met: for people living outside the U.S., thresholds start at $200,000 for single filers (higher for joint filers).
- Penalties for overlooking these forms can be substantial. Advisors urge tracking balances throughout the year rather than relying on year-end snapshots.
Practical advice and planning tips
- Discuss accounting and record-keeping with parents before an immigrant visa is issued.
- Keep careful records of:
- Rental income and property details
- Bank interest and account balances (including joint accounts)
- Indian taxes paid (for foreign tax credit support)
- Consider cross-border professional advice when:
- Parents receive a Green Card but intend to remain in India
- The family owns property or rental income in India
- There is any thought of abandoning permanent residency later
Key takeaway (quote-style)
Green Card holders are U.S. tax residents until they cease to be permanent residents, and while in that status they must report worldwide income to the IRS every year. They should consider FBAR and FATCA duties when foreign accounts and assets cross stated thresholds. Those who intend to end U.S. ties should use the formal Form I-407 process to surrender permanent residence, rather than relying on OCI status or time spent in India.
Households that follow these steps and seek timely advice tend to avoid costly compliance issues later.
This Article in a Nutshell
Indian parents who acquire U.S. Green Cards become U.S. tax residents and must report worldwide income on Form 1040, regardless of living in India. They may also need to file FBAR if foreign accounts exceed $10,000 and Form 8938 under FATCA when asset thresholds apply. OCI status or Indian residency does not exempt them. To cease U.S. tax residency, individuals should formally surrender the Green Card using Form I-407 and obtain cross-border tax advice to manage credits, penalties, and possible exit tax issues.
