U.S. Taxes for Remote India Work: Guide for H-1B, F-1, GC

(INDIA) A growing wave of cross‑border Remote Work between India and the United States 🇺🇸 is pushing U.S. taxes to the forefront for thousands of H‑1B / F‑1 / Green Card holders who are earning U.S. pay while living in India this year. Tax professionals say the questions have become urgent as workers try to reconcile who gets to tax their salaries when the work is performed in India for a U.S. employer, whether they must still file in the United States, and how their choices could affect a current visa or a future Green Card application.

According to analysis by VisaVerge.com, people working from India for U.S. employers now face two systems that may both claim the same income. The stakes rise as filing seasons in both countries come around and as immigration records increasingly cross‑reference tax compliance.

Core tax rules to know

• U.S. rule: Citizens and U.S. tax residents must report worldwide income, regardless of where the work is performed or where they live. That includes:
  • U.S. citizens and Green Card holders living in India — they still must file an annual federal return, typically on Form 1040 (see About Form 1040).
  • H‑1B workers who meet the substantial presence test.
  • F‑1 students once their initial nonresident period ends, often after five calendar years.

The message from tax advisers is firm: immigration status doesn’t cancel U.S. filing duties, and the place where you open your laptop does not change a U.S. person’s filing obligation.

• India’s rule: Taxation is based mainly on days on the ground and where the work is physically performed. The key trigger is 182 days in India’s financial year: cross that line and most people become Indian tax residents and are taxed on worldwide income. Even below that threshold, income for services performed while physically in India is typically India‑sourced.

Example: a software engineer on H‑1B who works from Bengaluru for a California firm — salary earned while present in India is likely taxable in India. Rental income or bank interest in India would also be taxable in India.

How double taxation is addressed (U.S. relief options)

Two long‑standing U.S. tools can reduce double tax — but they work differently and require deliberate choices:

1. Foreign Earned Income Exclusion (FEIE)
   • Claimed on Form 2555 (see About Form 2555).
   • Excludes qualifying foreign earned income for those who meet the bona fide residence test or the physical presence test.
   • For 2025, the approximate exclusion limit is $126,000.
   • Effect: lowers taxable income for U.S. purposes.
2. Foreign Tax Credit (FTC)
   • Claimed on Form 1116 (see About Form 1116).
   • Credits income taxes paid to India against U.S. tax on the same income.
   • Effect: reduces U.S. tax due.

Many workers mix the two (e.g., use FEIE for salary and FTC for passive income like interest or dividends). Advisors warn the choice has lasting effects and should be made considering both countries’ rules.

Typical numerical example

Consider an H‑1B employee earning $120,000 from a U.S. employer while living in India:
– India tax on that salary ≈ $20,000.
– Initial U.S. liability ≈ $25,000.
– If FEIE covers the full wages, U.S. tax on that salary could be reduced to $0, leaving India tax as the only actual payment.
– The person still must file in both countries if required by residency rules.

Important compliance items accompanying such cases:
– If combined Indian bank balances topped $10,000 at any time during the year, file the FBAR (FinCEN Form 114) via the FinCEN portal: Report Foreign Bank and Financial Accounts.
– If foreign assets cross FATCA thresholds, file Form 8938 (see About Form 8938).
– Indian mutual funds may be treated as PFICs, triggering Form 8621 (see About Form 8621).

None of these extra reports is optional; penalties can apply even when U.S. tax owed is zero.

Immigration and employment compliance intersections

Remote Work raises immigration and employer risks:

• H‑1B: The job must match the Labor Condition Application (LCA). Moving work outside the listed U.S. location without the right steps can create problems with wage, worksite, and assignment requirements.
• Employers worry about corporate exposure if overseas Remote Work creates a permanent establishment in India, a corporate‑level risk that can surprise smaller firms.
• F‑1 (OPT): Employment must align with the degree and OPT rules. Unauthorized work can jeopardize status.
• Green Card holders: Long absences abroad can raise questions about abandoning U.S. residence. Surrendering permanent residency is done via Form I‑407 (see USCIS I‑407).
• Citizenship applicants use Form N‑400 (see USCIS N‑400); travel and tax history are reviewed.

Advisers urge employees to coordinate with company counsel before extended Remote Work from India, because fixing noncompliance later is harder.

Routine filings and commonly missed items

The U.S. system expects annual reporting on worldwide income for U.S. persons — bringing many back to Form 1040 each year. Other routine triggers include:

• FBAR (FinCEN Form 114): required if combined foreign account balances exceed $10,000 at any point during the year.
• Form 8621: for PFICs (often Indian mutual funds).
• Form 1116: when claiming Foreign Tax Credit.
• Form 8938: FATCA reporting when foreign assets exceed thresholds (details at About Form 8938).

Common traps:
– Missing FBAR filings due to small joint accounts opened for convenience.
– Unreported PFIC holdings from routine mutual fund investments.
– Forgetting small amounts of Indian interest — which can later complicate immigration or financial checks.

Fixes are possible, but resolving issues from overseas adds cost and time.

Records, practical duties, and HR changes

Practical habits that ease filing and reduce risk:
– Keep a day‑by‑day log of physical location (to determine India residency and FEIE physical presence eligibility).
– Save Indian tax proofs: Form 16, TDS certificates, and receipts.
– Convert rupee amounts to dollars using IRS‑accepted exchange rates and keep records of the rates used.
– If combined Indian account balances exceeded $10,000, file FBAR via the FinCEN portal (Report Foreign Bank and Financial Accounts).
– Check PFIC rules before buying Indian mutual funds; see About Form 8621.

Employer policy responses:
– Some U.S. employers limit how long employees can work from India without triggering corporate or payroll changes.
– Others require pre‑approval and may require employees to handle India tax filings if they stay abroad beyond a set period.
– Switching to an India payroll changes benefits (retirement contributions, health benefits) and increases dual‑reporting odds.

Accountants recommend tracking days in India per financial year and keeping Indian tax documentation (Form 16 / TDS slips) to support U.S. filings.

Special note for F‑1 students and former students

• Many F‑1 students are nonresident aliens for tax in their first five calendar years in the U.S. After that, the substantial presence test can make them U.S. tax residents.
• If physically in India, services performed there are India‑sourced, but U.S. reporting can still apply depending on residency status.
• Students returning to India after graduation and working remotely for U.S. firms can unknowingly cross thresholds in both systems and then need to file late forms or correct earlier positions.
• Advisers suggest assuming U.S. filing may still apply and keeping records (bank statements, proof of Indian tax paid) for potential FTC claims.

Long‑term implications: immigration, mortgages, and background checks

• A clean U.S. tax record is important for mortgage applications, consular interviews, and employment‑based Green Card evidence.
• Green Card applicants often must provide several years of U.S. tax returns. Gaps or foreign tax issues can trigger requests for evidence.
• For Green Card holders, long absences may prompt questions about abandonment of residency. Surrender is through Form I‑407 (see USCIS I‑407).
• Citizenship applicants file Form N‑400 (see USCIS N‑400); travel and tax history are evaluated.

Tax and immigration choices should be aligned and treated as a single plan.

Practical checklist (what to do now)

1. Keep a reliable day‑by‑day location log.
2. Save Indian tax documents (Form 16, TDS slips, receipts).
3. Convert rupees to dollars with IRS‑accepted rates; retain records.
4. Check if Indian mutual funds trigger PFIC rules (Form 8621).
5. File FBAR if combined foreign accounts exceeded $10,000 (FinCEN portal).
6. Evaluate FEIE vs. Foreign Tax Credit with a cross‑border tax adviser.
7. Coordinate with employer immigration counsel before extended stays abroad.

These are not optional extras — they support clean records for both taxes and immigration.

Final takeaways

• U.S. citizens and Green Card holders must report worldwide income each year and can use FEIE or the Foreign Tax Credit to avoid paying two full taxes on the same salary.
• H‑1B workers and former F‑1 students may also be U.S. tax residents depending on presence rules.
• India taxes income for work performed within its borders and may tax worldwide income after 182 days in the financial year.
• The same paycheck can be taxable in both countries; relief comes from timely elections, credits on U.S. forms, and records from India.
• Act early: plan tax and immigration steps before traveling, not after the financial year closes.

For official IRS and FinCEN instructions and forms:
– Form 1040: About Form 1040
– Form 2555: About Form 2555
– Form 1116: About Form 1116
– Form 8938: About Form 8938
– Form 8621: About Form 8621
– FBAR (FinCEN): Report Foreign Bank and Financial Accounts
– USCIS I‑407: USCIS I‑407
– USCIS N‑400: USCIS N‑400

Workers who align these filings with India’s day‑count and sourcing rules, keep records of Indian tax payments, and coordinate with employer immigration teams can retain Remote Work arrangements while avoiding late‑filing stress. For H‑1B / F‑1 / Green Card holders now living and working in India for U.S. employers, timely planning may be the difference between a smooth year and a scramble to fix mistakes when returns are due.