US Tax Residency Rules for Indian-Americans and NRIs

Your U.S. tax residency decides what the IRS taxes and which forms you file. Residents are taxed on income from everywhere. Nonresidents are generally taxed only on U.S.-source income. The IRS decides by its own tests, not by your visa label, and not by whether India calls you a non-resident Indian (NRI).

The green card test

You are a resident for the year if you were a lawful permanent resident at any time during the calendar year. The status continues until it is taken away or formally abandoned. You abandon the status by filing Form I-407 or a letter with your green card attached, and for tax purposes you stay a resident until you have proof it was received.

The substantial presence test

You meet the test for a year if you were in the U.S. at least 31 days that year and at least 183 days over three years, counting all days this year, one-third of last year's days and one-sixth of the days two years ago. Any part of a day counts. Present 120 days in each of three years gives 120 + 40 + 20 = 180, which is not enough. H-1B and L-1 days count from the first day.

Exempt individuals and Form 8843

Days you spend as an exempt individual do not count. That includes students on F, J, M or Q visas who comply with their visa. The exclusion ends once you have been exempt as a student, teacher or trainee for any part of more than five calendar years, unless you show you do not intend to reside permanently and you have complied with your visa. J and Q teachers and trainees have their own limit tied to two of the last six years. You file Form 8843 to claim the exclusion.

Closer connection exception

Even if you meet the substantial presence test, you may be treated as a nonresident if you were in the U.S. fewer than 183 days, kept a tax home in a foreign country and had a closer connection to that country. You file Form 8840. You cannot claim it if you applied, or took steps during the year, to become a permanent resident, or if an adjustment of status application is pending. That matters for H-1B workers who are in the green card process.

Indian parents who visit for months each year can meet the substantial presence test. A parent present 150 days in each of three years has 150 + 50 + 25 = 225 days, but may still file Form 8840 if their tax home and closer ties are in India.

Dual-status years

A dual-status year is one where you are both a nonresident and a resident, usually in the year you arrive or leave. You are taxed on worldwide income for the resident part and on U.S.-source and certain connected income for the nonresident part. For the year, you cannot take the standard deduction, cannot use head of household rates and cannot file jointly, unless the election below applies. A dual-status return cannot be e-filed for tax year 2025.

First-year choice. If you do not meet either test in your first year but meet the substantial presence test in the next, you can choose to be a resident for part of the first year. You need at least 31 days in a row and presence for at least 75% of the days from the start of that stretch to year-end, with up to five days of absence counted as presence. You attach a statement, and you cannot file until you meet the test for the following year, so many people extend the deadline with Form 4868.

Treating a nonresident spouse as a resident. If one spouse is a citizen or resident and the other is not, you can choose to treat the other spouse as a resident, file jointly and report worldwide income. This can be the route for an H-4 spouse who is still a nonresident, for example in the first year (see ITIN for spouses and dependents).

When the treaty tie-breaker applies

If India also treats you as a resident, Article 4 of the treaty can decide where you are resident for treaty purposes. A green card holder who claims treaty residency in India files Form 1040-NR with Form 8833, and the IRS says this can trigger the expatriation tax rules. See the US-India treaty and speak to an immigration attorney first.

Leaving the U.S. or giving up a green card

If you have been a green card holder in at least 8 of the last 15 tax years and your residency ends, the expatriation rules and Form 8854 apply. A "covered expatriate" meets an income tax test, a net worth test ($2 million, per the IRS expatriation page for 2025) or a compliance test.

OCI is not a tax status

OCI is a registration under Indian citizenship law. The holder remains a foreign national and is not an Indian citizen. It affects travel and certain rights in India, not U.S. tax residency. India's "NRI" label has its own Indian-law meaning for Indian tax and FEMA, and your Indian CA can explain it. You can be an NRI for India and a U.S. resident for U.S. tax purposes at the same time.

How we can help

We count your days, review your visa and green card timeline, decide whether elections apply and prepare the right return, whether Form 1040, Form 1040-NR or a dual-status return. See H-1B and visa holders.

Frequently asked questions

General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.