Where Indian-Origin U.S. Residents Invest Abroad in 2025: Tax and Trends

The key distinction is this: once you are a U.S. tax resident, the U.S. taxes you on worldwide income, even if the money is earned in India or Dubai. That rule applies to most Indian-origin residents in the U.S., including many on H-1B, plus Green Card holders and U.S. citizens.

for tax year 2026 (returns filed in 2027), your first step is to classify yourself correctly. Under IRS rules, you are generally a U.S. tax resident if you meet the Green Card Test or the Substantial Presence Test.

The core rules are in IRS Publication 519 (U.S. Tax Guide for Aliens) at irs.gov/pub/irs-pdf/p519.pdf.

1) Who counts as “Indian-origin U.S. residents” for U.S. tax purposes

For practical purposes, this group includes:

• H-1B, L-1, O-1 and other nonimmigrants who meet U.S. tax residency tests
• Green Card holders (lawful permanent residents)
• Naturalized U.S. citizens of Indian origin

Once you become a U.S. tax resident, you generally must report:

• Worldwide income on Form 1040
• Foreign accounts and assets on special international forms, when thresholds are met

Motivations for investing abroad tend to be personal and financial. Readers often cite diversification, family obligations, immigration uncertainty, currency exposure, and retirement planning.

📅 Deadline Alert: For tax year 2026, Form 1040 is generally due April 15, 2027. You can extend to October 15, 2027 with Form 4868. FBAR also has an April 15 due date, with an automatic extension to October 15.

2) Top destination countries for 2025, and why they matter for 2026 U.S. returns

Indian-origin residents have concentrated overseas money in five places, and each creates a different U.S. tax “paper trail.”

• India: residential and commercial real estate, Indian equities, family businesses
• UAE (Dubai): real estate, holding companies, bank accounts, residency pathways
• Canada: real estate, equities and ETFs, small business investments
• United Kingdom: buy-to-let property, equities, commercial real estate
• Singapore: private banking products, holding companies and startups, selective commercial real estate

The U.S. tax system does not “care” that one country is low tax. It cares about your U.S. tax residency and the type of asset you bought.

3) Side-by-side comparison: What changes across India, UAE, Canada, UK, and Singapore

The table below focuses on what most often drives U.S. tax cost and compliance work for tax year 2026.

4) Asset-by-asset: how U.S. tax treatment differs (with number examples)

A) Overseas real estate (India, Dubai, Canada, UK, Singapore)

For U.S. tax residents, foreign real estate generally produces two U.S. tax items:

• Rental income reported annually on Schedule E (Form 1040)
• Capital gain on sale reported on Form 8949 and Schedule D

Example (numbers):

You own a Dubai apartment and collect $24,000 rent in 2026. You paid $6,000 in repairs, agent fees, and local charges. Your net cash income is $18,000.

On your U.S. return, you still must compute U.S. taxable rental income, including allowed expenses and depreciation. Depreciation can change the taxable amount, even if Dubai has no income tax.

If India withholds tax on rent, you may be able to claim a Foreign Tax Credit on Form 1116, subject to limits. The FTC rules are summarized in IRS Publication 514, and general international rules appear on the IRS international portal at irs.gov/individuals/international-taxpayers.

⚠️ Warning: “Dubai has no income tax” does not remove U.S. reporting. U.S. tax residents still report Dubai rent and gains, plus foreign accounts used for the purchase.

B) Foreign stocks, funds, and managed products: the PFIC line you should not ignore

Holding direct foreign stocks is often manageable. Owning many foreign pooled funds is where U.S. compliance becomes expensive.

Under U.S. law, many non-U.S. mutual funds and pooled investment vehicles are treated as PFICs (Passive Foreign Investment Companies). PFICs often require Form 8621 and can produce harsh tax results.

Common PFIC exposures for Indian-origin residents include:

• Indian mutual funds
• Many PMS/AIF structures, depending on facts
• Many Canadian mutual funds and ETFs
• Many UK OEICs and unit trusts
• Some private bank funds and structured products in Singapore

Example (numbers):

You invest $50,000 in an Indian mutual fund in 2026. You sell in 2029 with a $20,000 gain. If it is a PFIC and no election applies, the U.S. may tax parts of the gain at higher rates, plus an interest charge.

You also may need Form 8621 for each year you held it. PFIC rules are complex and fact-specific. The form and instructions are the starting point: Form 8621 (IRS) via irs.gov/forms-pubs.

C) Business ownership and startups: CFC reporting and more forms than you expect

If you own part of a foreign operating company or holding company, U.S. reporting can escalate quickly.

Common forms include:

• Form 5471 for certain interests in foreign corporations
• Form 8865 for certain interests in foreign partnerships
• Form 8858 for foreign disregarded entities
• Form 3520 / 3520-A for certain foreign trust events and some foreign gifts

CFC rules and related regimes can apply if U.S. persons control a foreign company. That can include family structures that seem “informal” but are legally ownership.

5) Immigration status and investing style: why H-1B looks different

Immigration status does not automatically decide your tax residency. It often affects behavior.

Here is what I see most often:

• H-1B / L-1: more conservative and liquid. Many prefer India property or bank products. Visa uncertainty plays a role.
• Green Card holders: longer time horizon. More likely to diversify across countries and asset classes.
• U.S. citizens: broader diversification. Estate planning becomes more prominent, including how assets pass to heirs.

H-1B specific note: Many H-1B workers are treated like any other U.S. employee for payroll taxes. That includes FICA taxes, unless a narrow exception applies. The F-1 and J-1 student and scholar FICA exemptions do not automatically carry into H-1B years.

6) The reporting rules most often missed (FBAR and FATCA)

FBAR (FinCEN Form 114)

You must file an FBAR if your foreign financial accounts exceed $10,000 in aggregate at any time during 2026. This includes many NRE/NRO accounts, demat-linked accounts, and overseas brokerage accounts.

The FBAR is filed with FinCEN, not the IRS, but it is a U.S. legal requirement. IRS links are on the international taxpayers page: irs.gov/individuals/international-taxpayers.

FATCA (Form 8938)

You may need Form 8938 if your foreign financial assets exceed certain thresholds.

Form 8938 is filed with your Form 1040. See Form 8938 and instructions at irs.gov/forms-pubs.

7) Common mistakes Indian-origin residents make when investing abroad

These are the recurring errors that create audits, penalties, or expensive amended returns:

• Treating UAE “no tax” as “no U.S. tax.” Rental income and gains still go on Form 1040.
• Buying foreign mutual funds without checking PFIC status and Form 8621 filing needs.
• Forgetting FBAR because each account is under $10,000. The test is aggregate, not per account.
• Mixing personal and family money in India, then missing Form 3520 for certain large gifts.
• Forming a Dubai or Singapore holding company, then missing Form 5471.
• Reporting foreign income but forgetting the foreign tax credit mechanics on Form 1116.

You are in the “India bucket” vs the “Dubai bucket” vs the “PFIC risk bucket” if…

You are “India-focused” if you primarily hold Indian property, direct Indian stocks, and India bank accounts tied to family obligations.

You are “UAE (Dubai)-focused” if you hold Dubai property or a Dubai company, plus UAE bank accounts.

You are “PFIC-exposed” if you own any non-U.S. mutual fund, ETF, AIF-like pooled vehicle, or private bank fund outside the U.S.

You are “business-reporting exposed” if you own a meaningful stake in a foreign company or partnership, even if family members run it.

Action items for tax year 2026 (filed in 2027)

1. Confirm whether you are a U.S. tax resident under Publication 519.
2. List every non-U.S. account and track the highest 2026 balance for FBAR.
3. Identify every foreign fund that may be a PFIC, and review Form 8621 needs.
4. If you own a foreign company, review whether Form 5471 applies before you file.
5. Keep purchase, sale, and expense records for foreign property to support Schedule E and capital gains.