This Article was fact checked and last updated for accuracy on July 1, 2025 by Mani Karthik
I’m Mani Karthik, and boy do I have a story for you.
Picture this: March 2017, I’m packing my life from Fremont back to Bangalore. My wife asks, “Mani, what about our US taxes?”
I confidently said, “We’re moving to India. Why would we file US taxes?”
Big mistake. HUGE.
Three months later, I get a letter from the IRS. My CPA friend in San Jose calls laughing. “Dude, you’re still a US citizen. Geography doesn’t change citizenship!”
That’s when I learned the hard truth about US tax obligations.
The Brutal Reality 🤯
Here’s what blew my mind. The US is one of only TWO countries in the world that taxes based on citizenship, not residence.
The other country? Eritrea.
Yeah, we’re in exclusive company with a country most Americans can’t locate on a map.
Personal Wake-Up Call
My first year back in India, I owed the IRS $3,200. Why? Because I didn’t know about FEIE (Foreign Earned Income Exclusion). I paid taxes in India AND the US on the same income.
My US-born son asked, “Papa, why are we paying taxes to a country we don’t live in?” Good question, kiddo.
Who Must File US Tax Returns? 📋
Short answer: If you’re a US citizen or green card holder, YES.
Longer answer: It depends on your income.
| Filing Status | 2024 Income Threshold | 2025 Income Threshold | Self-Employment |
|---|---|---|---|
| Single | $13,850 | $14,600 | $400+ |
| Married Filing Jointly | $27,700 | $29,200 | $400+ |
| Married Filing Separately | $5 | $5 | $400+ |
Source: IRS Publication 54
My Reality Check Moment
In 2018, I made only ₹8 lakhs in India (about $11,000). Thought I was safe. Wrong!
Self-employment income threshold is just $400. My consulting work put me over the limit.
Filed late. Paid penalties. Learned my lesson.
Key Filing Requirements for Expats 🌍
1. Income Reporting
- All worldwide income must be reported
- Indian salary, rental income, stock gains
- Even income already taxed in India
2. Filing Deadlines
| Deadline Type | Regular Date | Expat Extension |
|---|---|---|
| Tax Filing | April 15 | June 15 (automatic) |
| FBAR Filing | April 15 | October 15 (automatic) |
| Tax Payment | April 15 | No extension |
3. Required Forms
- Form 1040: Main tax return
- Form 2555: Foreign Earned Income Exclusion
- Form 1116: Foreign Tax Credit
- FinCEN 114: FBAR (if foreign accounts > $10,000)
- Form 8938: FATCA (if foreign assets > threshold)
The FEIE Game Changer 💡
Foreign Earned Income Exclusion saved my financial sanity.
FEIE Benefits for 2024-2025:
| Tax Year | Maximum Exclusion | Married Couple Max | Real Savings* |
|---|---|---|---|
| 2024 | $126,500 | $253,000 | $30,000+ |
| 2025 | $130,000 | $260,000 | $31,000+ |
*Based on 24% tax bracket
How FEIE Worked for Me
2019 Income: $85,000 from Bangalore consulting Without FEIE: $18,000 US tax bill With FEIE: $0 US tax bill
That’s ₹13.5 lakhs saved! Enough for my daughter’s school fees for two years.
FEIE Qualification Tests
Physical Presence Test (Easier for most)
- 330 days outside US in any 12-month period
- I track every trip obsessively now
Bona Fide Residence Test (For permanent expats)
- Full tax year as foreign resident
- Harder to prove, but more flexible
Foreign Tax Credit Alternative 🔄
Sometimes FTC beats FEIE. Here’s when:
FTC vs FEIE Comparison:
| Scenario | Best Choice | Why |
|---|---|---|
| High Indian taxes | Foreign Tax Credit | Dollar-for-dollar credit |
| Low/No Indian taxes | FEIE | Excludes income completely |
| Mixed income types | Combination | Maximize both benefits |
My 2020 Strategy
I paid ₹4.2 lakhs in Indian taxes on ₹18 lakhs income. Used FTC instead of FEIE. Result? $0 US taxes owed.
The math: High Indian tax rate (30%) > US rate (24%) = FTC wins.
FBAR: The $10,000 Trap 💰
Foreign Bank Account Report nearly caught me off-guard.
FBAR Requirements:
- File if foreign accounts total > $10,000 at ANY point
- Includes ALL accounts: savings, checking, fixed deposits
- Even joint accounts with parents!
My FBAR Story
2017: Had $8,000 in SBI account. Thought I was safe.
December: Dad’s medical emergency. Wife transferred $5,000 from US. Total: $13,000.
Technically required FBAR filing. Missed it initially. Filed late with reasonable cause letter.
Penalty avoided, lesson learned.
FBAR Penalties (Scary!)
| Violation Type | Penalty Amount |
|---|---|
| Non-willful | Up to $14,398 per account |
| Willful | Up to $147,963 per account |
Don’t mess with FBAR compliance.
FATCA Form 8938 📊
Another reporting requirement most people miss.
FATCA Thresholds (Living Abroad):
| Filing Status | Year-End Value | Maximum Value |
|---|---|---|
| Single | $200,000 | $300,000 |
| Married Joint | $400,000 | $600,000 |
What Counts:
- Foreign bank accounts
- Indian mutual funds
- Stock investments
- Life insurance policies
My FATCA Experience
2021: Stock portfolio hit $180,000. Under threshold as single filer.
2022: Got married (in India), filed jointly. New threshold: $400,000. Still safe.
But close call taught me to monitor values quarterly.
State Tax Complications 🏛️
Some US states never let you go.
Problem States:
- California: Aggressive about proving non-residence
- New York: High burden of proof
- Virginia: Military connections
- South Carolina: Intention-based rules
My California Escape
Lived in Fremont 2014-2017. Filed California non-resident forms. Showed:
- Bangalore apartment lease
- Indian voter registration
- Kids’ school admission
- Closed US bank accounts
Worked! No California taxes since 2017.
Streamlined Filing Procedure 🚀
Missed filing years? IRS has a lifeline.
Benefits:
- Covers last 3 years of returns
- No penalties if qualifying
- Simplified FBAR filing
My Friend’s Success Story
Raj missed 5 years of filings. Panic mode. Used Streamlined Procedure.
Filed 3 years returns. Total owed: $400 (after FEIE). No penalties.
“Best $5,000 I spent on a tax attorney,” he said.
Practical Filing Strategy 🎯
My Annual Tax Process:
January-March:
- Gather all Indian tax documents
- Calculate preliminary US liability
- Decide FEIE vs FTC strategy
April-May:
- File Indian returns first
- Get foreign tax paid amounts
- Prepare US returns
June:
- File US returns by June 15
- Pay any taxes due
- File FBAR if needed
Tools I Use:
- TurboTax: For simple returns
- FreeTaxUSA: Cost-effective option
- Tax Professional: For complex situations
Common Mistakes to Avoid ❌
1. “I Live in India, So No US Taxes”
Wrong! Citizenship triggers obligation, not residence.
2. Missing FBAR Deadlines
Different deadline than tax returns. Easy to forget.
3. Choosing Wrong FEIE/FTC Strategy
Run numbers both ways annually.
4. Ignoring State Tax Issues
Some states are sticky. Plan your exit properly.
5. Not Keeping Travel Records
Physical presence test requires precise tracking.
My Family’s Current Status 👨👩👧👦
2024 Tax Situation:
- Filed jointly with wife
- Used FEIE on Indian income
- FTC on US investment gains
- Total US tax paid: $847
Kids’ Impact:
- US-born son: Future US tax obligations
- India-born daughter: Only if she gets US status
Teaching them early about dual-country tax complexity.
Professional Help vs DIY 🤝
When I Use Tax Professionals:
| Situation | DIY Risk | Professional Worth It? |
|---|---|---|
| Simple W-2 income | Low | Maybe not |
| Self-employment | Medium | Probably yes |
| Multiple income sources | High | Definitely yes |
| First-time filing | High | Absolutely yes |
Cost vs Benefit
Professional fees: $800-2,000 Potential savings: $5,000-15,000 Peace of mind: Priceless
Recent Tax Law Changes 📈
2024-2025 Updates:
- FEIE increased to $130,000 (2025)
- FBAR penalties adjusted for inflation
- Enhanced FATCA enforcement
What’s Coming:
- Possible FEIE modifications
- Stricter enforcement
- Digital asset reporting requirements
Action Plan for Returners ✅
Immediate Steps:
- Determine filing requirement (use income thresholds)
- Gather all income documents (US and Indian)
- Calculate FEIE vs FTC benefits
- Check FBAR obligations
- File by June 15 deadline
Long-term Strategy:
- Track travel days religiously
- Maintain detailed financial records
- Review strategy annually
- Consider professional help
- Plan for kids’ future obligations
The Bottom Line 💡
Yes, you need to file US taxes after moving to India. But with proper planning, you might owe little or nothing.
My journey from panic to proficiency taught me this: Knowledge is expensive, but ignorance costs more.
I’ve helped hundreds of families through BackToIndia community navigate this maze. The key? Start early, stay informed, get help when needed.
Remember, we chose to keep US citizenship for its benefits. Tax compliance is part of that package.
Ready to tackle your US tax obligations? Join our BackToIndia community for step-by-step guidance!
Filing smart, not just filing,
Mani Karthik 🇺🇸➡️🇮🇳
Sources & References 📚
- IRS Citizens and Residents Abroad Filing Requirements
- Foreign Earned Income Exclusion Guide – IRS
- FBAR Filing Requirements – FinCEN
- FATCA Reporting Thresholds – IRS Form 8938
- Streamlined Filing Compliance Procedures
- US-India Tax Treaty
Disclaimer: This blog is for informational purposes only. Tax laws are complex and change frequently. Please consult a qualified tax professional for personalized advice. I am not a tax advisor, just a fellow returner sharing experiences.