A US citizen working in India is usually taxed twice in principle: India taxes income earned or received in India, and the US taxes its citizens on worldwide income. Relief comes from the foreign tax credit or the foreign earned income exclusion in the US, and, if the person is a resident of both countries, from the treaty tie-breaker. Residency in India depends mainly on days of stay.
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Key facts
| India: resident | In India 182 days or more in the tax year, or 60 days or more plus 365 days or more in the four preceding years (with exceptions) |
|---|---|
| India: tax year | 1 April to 31 March; the Income-tax Act, 2025 uses the term tax year |
| US: who is taxed on worldwide income | US citizens and residents, including green card holders |
| Treaty tie-breaker | Permanent home, centre of vital interests, habitual abode, nationality, then agreement between authorities (Article 4) |
| US relief | Foreign tax credit (Form 1116) or foreign earned income exclusion (Form 2555) |
| Not covered | Social security: see social security for US expats |
Indian residency in brief
An individual is resident in India if present for 182 days or more in the tax year, or for 60 days or more in the tax year and 365 days or more in the four preceding years. Some individuals get a longer threshold, for example Indian citizens and persons of Indian origin who visit India. A resident who has been non-resident in most past years may be a resident but not ordinarily resident, which narrows the income taxed in India. Residents are taxed in India on worldwide income; non-residents only on income received, accrued or arising in India.
US taxation of citizens abroad
The US taxes citizens and green card holders on worldwide income wherever they live. An American working in India files a US return and reports the Indian salary. The US then relieves double tax mainly through two tools.
| Tool | How it works | Notes |
|---|---|---|
| Foreign tax credit (Form 1116) | Credit for Indian income tax paid against US tax on the same foreign income | Limited to the US tax on that income; unused credit may carry over under US rules |
| Foreign earned income exclusion (Form 2555) | Excludes foreign earned income up to an annual limit from US tax | Needs bona fide residence abroad or the physical presence test; the limit is set each year by the IRS |
| Foreign housing exclusion or deduction | Relief for qualifying housing costs | Subject to limits |
Where the treaty helps individuals
- Tie-breaker. If someone is a resident of both countries under domestic law, Article 4 decides which country is the treaty residence.
- Employment income. The treaty has a rule for dependent personal services that can exempt short stays by an employee of a non-resident employer. Check the conditions in the treaty text, including the days test and who bears the cost.
- Relief. Article 25 provides the foreign tax credit that underlies relief in the country of residence.
- Saving clause. The US keeps the right to tax its own citizens, so for American citizens the treaty mostly operates through credits and a few exceptions.
Short business trips
A US employee who visits India for meetings is often outside the Indian tax net if the treaty's conditions are met, but the visit can still create permanent establishment risk for the parent and reporting duties. Track days, activities and who pays. See treaty and PE risk and sending a US executive to India.
What an expat should do each year
- Keep a day-by-day travel log for India and the US.
- Confirm Indian tax residency status at the end of the tax year.
- File the Indian return and pay or claim Indian tax, with employer Withholding Tax records.
- File the US return and choose between credit and exclusion with a US adviser.
- Report foreign accounts to the US where thresholds are met. See US parent obligations.
What this means for a US parent
- Tax equalization or hypothetical tax policies need both an Indian and a US computation. Agree who runs them before the assignment starts.
- Employer Withholding Tax on salary in India is monthly, so the first month of an assignment already needs a plan.
Mistakes to avoid
- Counting only the days on the work permit, not the days in India.
- Assuming the foreign earned income exclusion removes all US filing.
- Forgetting that the treaty's saving clause limits relief for US citizens.
- Not filing an Indian return because tax was deducted at source.
How AU Corporate handles this
We handle expat payroll, Indian tax returns and residency analysis in India, and coordinate with your US adviser on the credit.
Related services: HR and payroll · Taxation and regulatory services
Official sources
Rules on this page can be verified at the primary sources: the Income Tax Department and the Internal Revenue Service.
Frequently asked questions
How is a US citizen working in India taxed?
India taxes income earned or received in India, and residents on worldwide income. The US taxes its citizens on worldwide income. Relief comes through the foreign tax credit or exclusion.
When does a foreigner become tax resident in India?
Generally with 182 days or more in India in the tax year, or 60 days or more in the year plus 365 days or more in the preceding four years, with exceptions.
What is the treaty tie-breaker?
A set of tests in Article 4 that decide which country is the treaty residence when a person is resident in both.
Can an expat use the foreign earned income exclusion?
Possibly, if the person passes the bona fide residence or physical presence test. A US adviser should confirm.
Is the foreign tax credit better than the exclusion?
It depends on the person's income, Indian tax and family situation. It needs a computation.
Does the treaty exempt short business trips?
It can exempt short stays for employees of a non-resident employer if the conditions are met, but the visit can still create permanent establishment risk.
Do green card holders count as US citizens for these purposes?
For US worldwide taxation, yes: US residents are taxed on worldwide income. Treaty residence rules may differ, so take advice.
Does an expat need to file in both countries?
Usually yes, if resident in India or earning Indian-source income and a US citizen or resident.
Related guides
Social Security for US Expats in India: Is There a US-India Totalization Agreement?
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Read the guide →Sources
Last updated 14 October 2026. General information only, not legal or tax advice. Indian rules change often; confirm current requirements before acting.