The biggest 2026 US tax filing updates for NRIs come from the One Big Beautiful Bill Act (OBBBA). It made the 10% to 37% brackets permanent, added new deductions, ended the EV and home energy credits, and put a 1% tax on cash sent abroad. This guide covers US citizens in India, returning NRIs, and US residents with money back home.

These changes sit on top of the India-specific rules you already know: FBAR, FATCA, PFIC reporting on Indian mutual funds, Form 3520 for gifts from parents, and the India-US tax treaty. We'll walk through the new numbers first, then what each type of India-connected taxpayer needs to file.

*Updated for tax year 2026 (returns filed in 2027). By the US tax team at Dinesh Aarjav & Associates.*

What Are The 2026 US Federal Tax Brackets?

The 2026 US federal brackets run from 10% to 37%, and the IRS has adjusted every threshold for inflation. These figures come from IRS Rev. Proc. 2025-32 and apply to returns filed in 2027.

Here's the quick version for the three most common filing statuses.

How Do The Brackets Affect You If India Is Part Of Your Finances?

Numbers on a chart look simple. Add India into the mix and a few things change.

• Married filing separately is common for NRI families. If your spouse isn't a US person, you often file separately. That uses the single brackets, but the 35% band ends at $384,350 and the standard deduction is only $16,100. Electing to treat your spouse as a US resident unlocks the $32,200 joint deduction, but it pulls your spouse's Indian income into your US return. It's worth modelling both.
• Indian income can push you up a bracket. NRE and NRO FD interest, Indian rent and Indian mutual fund gains stack on top of your US salary. Picture a software engineer earning $180,000 with ₹15 lakh of FD interest. Part of that interest can land in the 24% or 32% bracket, and NRE interest has no Indian tax to claim credit for.
• The 0% capital gains band is wider than most people think. Long-term gains and qualified dividends are taxed at 0% up to $49,450 of taxable income (single) or $98,900 (joint). Directly held listed Indian shares can qualify. Indian mutual funds can't, because they're PFICs.
• Trusts hit 37% fast. Estates and trusts reach 37% at just $16,000. That matters for Indian family trusts and NPS accounts treated as foreign trusts.
• AMT can still bite. The exemption is $90,100 (single) and $140,200 (joint), phasing out from $500,000 and $1,000,000. Big ISO exercises or some foreign tax credit positions can trigger it.
• Net investment income tax adds 3.8%. It applies once modified AGI passes $200,000 (single) or $250,000 (joint). Indian rent, interest and capital gains all count.

What's New On Your 2026 US Tax Return? 14 Changes To Know

There are 14 changes that matter for 2026. Each one adds a deduction you have to prove, removes a credit you may have counted on, or changes a form you'll receive. Think of this list as your document checklist.

Deductions That Put Money Back In Your Pocket

1. No tax on overtime (2025 to 2028). You can deduct the overtime premium (the "half" in time-and-a-half) up to $12,500, or $25,000 joint. It phases out above $150,000 / $300,000 MAGI and shows in W-2 Box 12, code TT. It's useful for H-1B and L-1 workers in hourly roles, healthcare and hospitality.
2. No tax on tips (2025 to 2028). Qualified tips up to $25,000 are deductible, with the same MAGI phase-outs. Look for W-2 Box 12 code TP and your occupation code in Box 14b.
3. Car loan interest. You can deduct up to $10,000 of interest on a loan taken after 31 December 2024 for a new, personal-use vehicle assembled in the US. It phases out above $100,000 / $200,000 MAGI. Your lender issues Form 1098-VLI and the VIN must be reported. A loan from an Indian bank, or for a car in India, doesn't qualify.
4. Senior deduction. There's an extra $6,000 per person aged 65 or older by 31 December 2026 (born before 2 January 1962). It phases out above $75,000 / $150,000 MAGI. This helps Indian parents who've become US residents and file their own returns.
5. Charity without itemising. Cash gifts to qualified US charities up to $1,000 ($2,000 joint) are deductible even if you take the standard deduction. Itemisers only count gifts above 0.5% of AGI. Gifts to Indian temples, trusts or NGOs don't count unless they go through a qualifying US charity.
6. SALT and mortgage. The state and local tax cap rises to $40,400 (reduced above $505,000 MAGI), and mortgage insurance premiums (PMI) are deductible again. That's big for NRI families in California, New Jersey and New York. Property tax on your Indian flat is foreign real property tax, so it stays non-deductible.

Credits That Have Ended

1. Electric vehicle credit, mostly gone. New and used clean vehicle credits ended for vehicles acquired after 30 September 2025. A 2026 delivery qualifies only if a written binding contract and payment were in place by that date.
2. Home energy credits ended. The energy efficient home improvement and residential clean energy (solar) credits ended on 31 December 2025, so 2026 installs don't qualify. The home EV charger credit applies only to chargers placed in service by 30 June 2026 in eligible areas.

New Accounts And Family Benefits

1. Trump Account. This is a new savings account for children, opened with a Form 4547 election. US-citizen children born 2025 to 2028 can get a one-time $1,000 government deposit, and families can add up to $5,000 a year. Indian-American parents of newborns should look at this. US-citizen children living in India may also qualify.
2. Dependent care. The employer dependent care FSA limit rises to $7,500, and the child and dependent care credit rate rises to 50% for lower incomes. Daycare abroad can count. Paying a relative to look after your child in India rarely meets the rules.
3. HSA. Bronze and catastrophic Marketplace plans now count as HSA-eligible, and direct primary care fees up to $150 a month can be paid from an HSA. The 2026 limits are $4,400 self-only and $8,750 family. India doesn't recognise the HSA's tax-free status, which matters once you move back.
4. Marketplace insurance. The enhanced premium tax credit ended after 2025, and from 2026 any excess advance credit must be repaid in full. Keep your Form 1095-A. Families who arrive or leave mid-year are especially exposed.

Other Changes And 2026 Limits

1. Other changes.

• Gambling losses are limited to 90%.
• Forms 1099-NEC and 1099-MISC are issued only for $2,000 or more.
• Form 1099-K applies only above $20,000 and 200 transactions.
• 529 plans can pay up to $20,000 of K-12 tuition.
• Casualty losses from state-declared disasters now qualify.
• Crypto brokers issue Form 1099-DA, with cost basis for assets acquired from 1 January 2026. Indian crypto exchanges don't, so you'll have to build those records by hand.

2. 2026 limits.

• Standard deduction: $16,100 single, $32,200 joint, $24,150 head of household.
• IRA: $7,500 (+$1,100 at 50+).
• 401(k): $24,500 (+$8,000 at 50+; +$11,250 at 60 to 63).
• Foreign earned income exclusion: $132,900, the key number for US citizens working in India.
• Annual gift exclusion: $19,000 per person, and $194,000 to a non-US-citizen spouse. That helps when one spouse holds only an Indian passport.

Two More 2026 Changes For NRIs Sending Money To India

Two more OBBBA rules matter if you send money home or have family there.

• 1% remittance tax. Since 1 January 2026, transfers abroad funded with cash, money orders or cashier's cheques carry a 1% federal excise tax, collected by the provider. Transfers from a US bank account or US-issued card are exempt, so a bank transfer to India avoids it.
• $15 million estate and gift exemption for US persons. Non-resident Indians who own US shares still get only a $60,000 estate exemption, and there's no India-US estate tax treaty. Parents in India holding US stocks should review this.

Who Needs To File A US Tax Return If You're Connected To India?

You need to file a US federal return if you're a US person and your gross worldwide income is above the filing threshold. For 2026 that roughly matches the standard deduction: $16,100 single, $32,200 married filing jointly and $24,150 head of household. Self-employment income of $400 or more triggers filing by itself, and a married person filing separately has a threshold of just $5.

"US person" is wider than many people think. It includes:

• US citizens, including people born in the US to Indian parents who've lived in India since childhood (often called accidental Americans).
• Green card holders, for every year the card is valid, even if you've moved back to India and haven't surrendered it.
• Resident aliens under the substantial presence test: at least 31 days in the US this year, and 183 weighted days over three years (all days this year, one-third of last year's, one-sixth of the year before).

Non-residents aren't off the hook either. If you live in India but earn US rent, sell US shares or own a US LLC, you still file Form 1040-NR on that US-source income.

Quick Answer: US Tax Filing For NRIs At A Glance

The short version: income goes on Form 1040, Indian accounts are disclosed on the FBAR and Form 8938, and Indian mutual funds, NPS and family trusts each trigger their own information returns. The treaty and the foreign tax credit usually stop double tax, but only if your return is built to claim them.

In practice, most people fall into one of four groups, and each has its own traps. Let's take them one at a time.

US Tax Filing For US Residents With Indian Investments

If you're a US resident with Indian accounts, you must report worldwide income and disclose your Indian assets. This is the biggest group we see: H-1B and L-1 professionals, green card holders and naturalised citizens who still hold NRO/NRE accounts, FDs, mutual funds, property or NPS. The tax itself is often modest. The disclosure burden is what catches people out.

Are NRE And NRO Fixed Deposits Taxable In The US?

Yes. NRE interest is tax-free in India, which is exactly why people forget it, but the US doesn't recognise that exemption. Interest on NRE, NRO and FCNR deposits is taxable on your US return. Report cumulative and reinvestment FDs as interest is credited, not at maturity. If India deducted TDS on NRO interest, you can usually claim it as a foreign tax credit on Form 1116.

Are Indian Mutual Funds A PFIC Problem?

Yes. Indian mutual funds are Passive Foreign Investment Companies (PFICs) under US law. Each fund generally needs its own Form 8621. Without a timely election, the default "excess distribution" regime taxes gains at the top ordinary rate plus an interest charge.

A SIP across six funds can mean six Form 8621s every year. For many clients we use the mark-to-market election from the first year it's available, which keeps tax predictable. We also plan exits around the RNOR window for those heading back to India.

How Are Indian Shares, Rent And Property Sales Taxed In The US?

• Listed Indian shares held directly aren't PFICs. Dividends can qualify for lower US rates under the treaty.
• Rent from an Indian flat goes on Schedule E with US-style depreciation (30 years for foreign residential property). The result often looks very different from your Indian ITR.
• Selling Indian property means the gain is worked out in dollars, with no Indian indexation on the US side. The Indian capital gains tax (and TDS withheld at sale) becomes a foreign tax credit.

Do You Have To Report Gifts And Inheritances From Family In India?

Yes, if they're large. Money from parents isn't taxable income in the US, but receiving more than $100,000 in a year from a non-US individual (gifts and bequests together) requires Form 3520. Missing it can cost up to 25% of the gift. We file many of these for clients who inherit a parent's flat or get funds for a US home purchase.

How Are NPS, EPF, PPF And Indian Family Trusts Reported?

This is where US rules are least settled. Many practitioners, including our team, treat NPS as a foreign trust needing Forms 3520 and 3520-A. EPF and PPF are looked at case by case for trust and FBAR reporting. An Indian private family trust where you're a beneficiary or grantor almost always brings in Form 3520-A. These are judgement calls, so a generic US preparer is usually the wrong fit.

Do US Citizens And Green Card Holders Living In India Still File US Taxes?

Yes. The US taxes by citizenship, so moving to Bengaluru or Gurugram doesn't end your US filing. You file Form 1040 every year alongside your Indian ITR. The calendars differ too: India's year runs April to March, and the US year runs January to December. Splitting Form 16 salary and Indian TDS across two US years is one of the first things we fix for new clients.

FEIE Or Foreign Tax Credit: Which Saves More?

You have two main tools to avoid double tax on Indian salary.

• Foreign Earned Income Exclusion (Form 2555) lets you exclude up to $132,900 of foreign earned income for 2026. You need to pass the bona fide residence test or the physical presence test (330 full days outside the US in any 12-month period).
• Foreign Tax Credit (Form 1116) gives a dollar-for-dollar credit for income tax paid in India.

Indian rates at middle and higher incomes are often at or above US rates, so the credit frequently wins. Excess credit carries forward for 10 years. The FEIE covers only earned income, never FD interest, rent or capital gains, and it can cost you the refundable part of the child tax credit. We model both before filing.

What Do US Citizens In India Often Miss?

• No US-India totalisation agreement. A self-employed US citizen in India can owe 15.3% US self-employment tax on top of Indian income tax, with no credit for it.
• An Indian spouse. If your spouse isn't a US person, you choose between married filing separately and electing to treat them as a US resident for a joint return. Each choice affects FBAR, PFIC and your brackets.
• Your old US state. States like California and Virginia can keep treating you as a resident if you never formally broke domicile.
• Renouncing citizenship or surrendering a green card. Long-term green card holders and citizens may face the exit tax under Section 877A and must file Form 8854. Five years of clean compliance is one test, so getting current comes first.

How Do NRIs In The US File: H-1B, L-1, F-1 And First-year Arrivals?

In the year you arrive, you're usually a dual-status taxpayer: a non-resident until your residency start date and a resident after it. Only income from the resident period, plus US-source income before it, goes on the US return. It gets tricky because you're probably still an Indian resident that year, with salary, bonus or ESOPs from an Indian employer straddling both periods.

What Are Your Choices In The First Year?

1. File a dual-status return. That's Form 1040 with a Form 1040-NR statement attached. There's no standard deduction, no joint filing, and it usually has to be paper-filed.
2. Make the first-year choice under Section 7701(b)(4) if you arrived late in the year and will meet the substantial presence test next year.
3. Elect full-year residency with your spouse (Section 6013(g) or 6013(h)) to file jointly and claim the full standard deduction. The trade-off is that your worldwide income for the whole year, including Indian income before the move, comes into the US return, and the foreign tax credit has to do the work.

The cheapest option depends on your pre-move Indian income, your spouse's status, and whether either of you holds Indian mutual funds that would then need Form 8621. We run the numbers on all three.

How Are F-1 And J-1 Students Taxed?

F-1 students are generally "exempt individuals" for their first five calendar years. They file Form 1040-NR with Form 8843. Indian students get a handy extra: Article 21(2) of the India-US treaty lets them claim the standard deduction on Form 1040-NR, which students from most other countries can't. Many university tax packages don't apply it correctly.

What If You're A Tax Resident Of Both India And The US?

The treaty's tie-breaker rules in Article 4 decide which country gets primary taxing rights. Claiming treaty residence in India while living in the US needs Form 8833 and can affect your FBAR and green card position. Don't tick that box casually.

What Should Returning NRIs Know About US Taxes?

Moving back to India is a two-country tax project, and the US side doesn't end when your flight lands. Your departure year is typically dual-status again, resident first and non-resident after your residency termination date. If you still hold a green card, you stay a US tax resident until you formally surrender it with Form I-407. Long-term holders (8 of the last 15 years) must also file Form 8854 and test for the exit tax.

What Should You Settle Before And After The Move?

• 401(k) and IRA. You can usually leave them in the US. Early withdrawals before 59½ carry a 10% additional US tax on top of income tax, and India taxes the growth too, with relief for specified foreign retirement accounts. Timing withdrawals inside your RNOR years is often the biggest planning win.
• Selling your US home. The Section 121 exclusion ($250,000, or $500,000 joint) still applies after you move if you lived there two of the five years before the sale. Sell too late and you lose it.
• RSUs, ESPP and deferred bonuses. Equity that vests after you leave is partly sourced to the US by workdays. That creates US tax as a non-resident and Indian tax as a resident on the same shares, so the credit must be claimed in the right country.
• US brokerage and bank accounts. Some brokers restrict accounts once you update to an Indian address. From India's view, your US account becomes a foreign account and must appear in Schedule FA once you turn ordinary resident.
• Indian investments made while abroad. Mutual funds bought as a US resident still carry PFIC history. India taxes the gains whatever your status, while the US stops once you're a non-resident. Selling before or after your residency termination date can change the total bill a lot.

We coordinate your final US return and first Indian ITRs as one job, so residency dates, exchange rates and credits match on both sides. Our guides on RNOR status for returning NRIs and 401(k) withdrawal for NRIs returning to India go deeper on the India side.

How Are Indian Assets Reported On A US Tax Return?

Every common Indian investment has a US income treatment and a separate disclosure treatment. You need both right.

Treatment of NPS, EPF and PPF isn't settled in IRS guidance. The table shows a conservative reporting position, and your own facts decide the final answer.

FBAR Vs FATCA Form 8938: What Must Indian Account Holders Disclose?

The FBAR and Form 8938 overlap, but they're separate filings with different thresholds and penalties. Most clients with Indian accounts file both.

Two India-specific traps come up all the time. A joint account with your parents counts at its full balance, not your share. And signing authority on a parent's or family business account is reportable even if none of the money is yours.

Indian banks and fund houses have reported US-person accounts to the IRS under the India-US FATCA agreement since 2015. The IRS can already see these accounts, whether or not you report them.

What Are The US Tax Deadlines For Tax Year 2026?

The main 2026 return is due on 15 April 2027. US persons living in India get an automatic extension to 15 June 2027. Interest still runs on unpaid tax from 15 April, whichever date you file by.

If you also have Indian income, keep the 31 July ITR deadline in view. The two returns feed each other through the foreign tax credit, so it helps to prepare them on one timetable.

Behind On US Filings? How To Catch Up Without Heavy Penalties

The IRS Streamlined Filing Compliance Procedures are built for this. They apply if you missed FBARs, Form 8938, Form 8621 or whole US returns because of Indian accounts, as long as the failure was non-willful and the IRS hasn't contacted you first.

If the income was reported and only an information return was missed (a late Form 3520 or 8938, say), the delinquent FBAR or delinquent international information return procedures with a reasonable-cause statement can fit better. The costly mistake is picking the wrong programme, or certifying non-willfulness without a defensible story.

10 Costly Mistakes On US Returns With An India Connection

1. Leaving NRE interest off the US return because it's tax-free in India.
2. Reporting Indian mutual funds as ordinary investments instead of filing Form 8621.
3. Missing the FBAR on a joint account held with parents.
4. Using Indian financial-year figures (April to March) on a calendar-year US return.
5. Converting rupees at a random rate instead of a consistent, documented one.
6. Claiming the FEIE by default when the foreign tax credit would save more.
7. Not filing Form 3520 after a large gift or inheritance from India.
8. Ignoring NPS and Indian family trusts until a 3520-A penalty notice arrives.
9. Keeping a green card after moving to India and assuming US filing has stopped.
10. Using a US app that can't handle dual-status returns, PFICs or Indian treaty positions.

Get Your 2026 US Tax Filing Done Right With Dinesh Aarjav & Associates

Most US preparers know the IRS but not the ITR, and most Indian CAs know the ITR but not the IRS. Cross-border families need one team that reads both. That's the gap our practice was built to fill.

Here's what we file for each type of taxpayer in 2026.

Why Do NRIs Choose Our Team?

• Both returns, one team. We prepare your US federal (and state) return and Indian ITR together, so residency dates, exchange rates, TDS and credits reconcile line by line.
• India-side depth. NRO/NRE accounts, mutual fund statements, NPS, EPF, Section 54/54EC planning, Form 15CA/15CB and FEMA rules are daily work for us.
• Complex forms, handled routinely. Dual-status returns, Form 8621, Forms 3520 and 3520-A, Forms 2555 and 1116, Form 8854, and Streamlined packages.
• Returning-NRI planning. RNOR timing, retirement withdrawals, US home sales and RSU sourcing, planned before you move.
• Practitioner-led. Our partners write on NRI and cross-border tax for Economic Times and Outlook Money, and you work directly with them across IST and US time zones.

How Does Our US Tax Filing Service Work?

1. Free discovery call. We map your residency status, Indian assets and US filing history in 20 to 30 minutes.
2. Fixed-fee proposal. You get a clear quote covering every form, including FBAR and information returns.
3. Secure document upload. Send W-2s, 1099s, Indian bank statements, CAS statements, Form 16 and AIS through an encrypted portal.
4. Preparation and review. Your US and Indian positions are prepared together and reviewed by senior professionals.
5. E-filing and year-round support. We e-file where the IRS allows, paper-file dual-status returns, file the FBAR, and stay your contact for IRS letters and next year's planning.

Ready to file your 2026 US tax return or catch up on past years? Book a consultation with our US-India tax team and get one coordinated plan for both countries.