US Tax Implications and Reporting Requirement
US Tax Implications and Reporting Requirements for NRIs & US Persons
By Classic Partner – Chartered Accountants for Global Tax Compliance
The United States follows a citizenship-based taxation system, which means US citizens, Green Card holders, and resident aliens (meeting the Substantial Presence Test) are liable to pay tax on their worldwide income, no matter where they live.
At Classic Partner, we specialize in assisting NRIs, US Persons, and Indian-origin individuals in understanding their US tax obligations, reporting requirements, and cross-border compliance needs.
Who Is a US Person?
US citizens (by birth or naturalization)
Green Card holders
Individuals qualifying under the Substantial Presence Test (SPT)
Substantial Presence Test (SPT):
You are considered a US tax resident if:
You spend at least 31 days in the US in the current year, and
A total of 183 days over 3 years, calculated as:
100% of days in the current year
1/3 of days in the previous year
1/6 of days in the year before that
Key US Tax Provisions
Federal Tax Filing
Mandatory annual filing on a calendar year basis
Must report global income (including Indian salary, rental income, or capital gains)
Federal Tax Rates (2024)
Progressive rates 10% – 37%, depending on income and filing status
Filing Deadlines
April 15 – Regular deadline
June 15 – Extension for US Persons living abroad
October 15 – With Form 4868 (extension)
Exclusions & Special Provisions
Foreign Earned Income Exclusion (FEIE): Up to $112,000 (2023) can be excluded if conditions are met.
Gift & Estate Tax:
Annual gift exemption: $17,000 per recipient (2023)
Lifetime exemption: $12.92 million (2023)
Gift reporting: Form 709 (for gifts exceeding annual exemption)
Gifts received by US Persons from foreign persons above $100,000/year must be reported on Form 3520.
Estate Tax: Applies to worldwide assets of US citizens/residents. Filing via Form 706 within 9 months of death.
Taxation of Indian Mutual Funds – PFIC Rules
Most Indian Mutual Funds are classified as Passive Foreign Investment Companies (PFICs) under US law.
Mark-to-Market Method: Annual taxation of notional gains.
Qualified Electing Fund (QEF): Rarely practical, requires detailed data.
Excess Distribution Method: Harshest, taxes historical income at highest rates + interest.
Form 8621 must be filed for PFIC holdings
Key US International Reporting Forms
| Requirement | Form | Threshold | Due Date |
|---|---|---|---|
| Foreign Financial Accounts | FBAR (FinCEN 114) | >$10,000 (aggregate) | Apr 15 (auto ext. to Oct 15) |
| FATCA Asset Reporting | Form 8938 | >$50,000 (single), >$100,000 (joint) | Apr/Oct 15 |
| Foreign Gifts | Form 3520 | >$100,000 | Apr/Oct 15 |
| Foreign Corporations | Form 5471 | Control/ownership based | Apr/Oct 15 |
| Foreign Partnerships | Form 8865 | Control/ownership based | Apr/Oct 15 |
Why Classic Partner?
Our NRI and US tax desk assists with:
US Tax Return preparation (Form 1040, 1040NR)
FATCA & FBAR compliance
PFIC reporting for Indian mutual funds
Gift & Estate Tax planning
Cross-border tax advisory & DTAA consultation
We also guide clients through IRS Streamlined Filing Compliance Procedures for resolving past non-compliance safely.
Need Help with US Tax Compliance?
At Classic Partner, we ensure your global income, investments, and assets are reported correctly to both US and Indian tax authorities—minimizing risks and maximizing compliance.
Contact us today to discuss your US Tax Filing & Reporting obligations.
