US-India – The Tax Planet

Policy & Tax

US-India Trade & Tax Guide: What Every Business Must Know

TheTaxPlanet

May 21, 2026

United States & India

Millions of Indians live and work in the United States — as H1B professionals, Green Card holders, and US citizens with deep Indian financial ties. Managing tax obligations across both countries is one of the most complex challenges they face. This guide breaks it down clearly.

Who Needs US-India Tax Guidance?

The US-India tax relationship is unique because it is not just about businesses — it directly affects millions of individuals. Whether you are an H1B visa holder with Indian investments, a Green Card holder with property back home, or a US company outsourcing to India, your tax position demands specialist attention.

The United States taxes its citizens and residents on worldwide income — meaning even if you earned money in India, the IRS wants to know about it. Combined with India’s own tax rules, this creates a dual obligation that catches many people off guard.

The Unique Challenges of US-India Taxation

Unlike UK-India or UAE-India, the US tax system is exceptionally aggressive on cross-border income. Here is what makes it uniquely complex:

Worldwide Income Taxation — The US taxes citizens and Green Card holders on all income earned globally, including Indian salaries, rental income, and investments

FATCA Reporting — Indian bank accounts, fixed deposits, and investments above $10,000 must be reported to the IRS annually or face heavy penalties

FBAR Filing — US persons with Indian financial accounts exceeding $10,000 must file a separate Foreign Bank Account Report every year

GILTI on Indian Subsidiaries — US companies with Indian subsidiaries face Global Intangible Low-Taxed Income tax — a uniquely American tax trap most accountants miss

How the US-India DTAA Protects You

The US-India Double Taxation Avoidance Agreement ensures you do not pay full tax twice on the same income. But claiming these benefits correctly requires careful planning:

Reduced Withholding Tax — DTAA reduces withholding tax rates on dividends, interest, and royalties paid between US and Indian entities

Foreign Tax Credits — Tax paid in India can be credited against your US tax liability, significantly reducing your overall burden

Residency Tie-Breaker Rules — If both countries claim you as a tax resident, DTAA tie-breaker rules determine where you pay tax

Business Profits Protection — Indian business profits are only taxable in the US if you have a permanent establishment there

What Should You Do Now?

The US tax system leaves no room for error — missed deadlines, unreported accounts, and unclaimed treaty benefits can cost thousands. Whether you are an NRI, H1B holder, or a business with Indian operations, acting now is far cheaper than fixing mistakes later.

Check your FATCA & FBAR obligations — If you have Indian accounts, investments or property, reporting deadlines are strict and penalties are severe

Claim your DTAA foreign tax credits — Most NRIs overpay US tax simply because they do not correctly claim Indian tax credits

Review your Indian investment structure — PMS, mutual funds and NRE/NRO accounts all have different US tax treatments that need specialist review

Plan around GILTI if you own an Indian company — US shareholders of Indian businesses need proactive GILTI planning every year

Speak to a US-India specialist — A general accountant will not know both systems; you need someone who lives and breathes cross-border US-India tax