For many Indians living in the United States, moving back home after years abroad is a big decision — emotionally and financially. However, one critical aspect often overlooked during this transition is the US Exit Tax.
If you are a US Green Card holder planning to return to India or revoke your Green Card, understanding the Exit Tax implications is crucial to avoid unexpected tax liabilities.

At Dinesh Aarjav & Associates, we assist NRIs and US residents in managing their cross-border tax filings, compliance, and repatriation planning. Here’s a detailed guide on what the US Exit Tax means, who it applies to, and how you can plan your exit smartly.

What Is the US Exit Tax?

The US Exit Tax (Internal Revenue Code Section 877A) is a tax levied on certain individuals who give up their US citizenship or long-term Green Card status.
Introduced in 2008, this tax treats you as if you sold all your global assets on the day before expatriation, and you must pay capital gains tax on the hypothetical profit — even if you haven’t actually sold anything.

This is why proper tax consultation before surrendering your Green Card is essential.

Who Is Subject to the Exit Tax?

You may be considered a “covered expatriate” if you meet any one of these conditions at the time of expatriation:

• Your net worth exceeds USD 2 million on the date of exit.
• Your average annual US income tax liability for the past five years exceeds a threshold (USD 201,000 for 2024, adjusted yearly).
• You have not complied with all US tax obligations for the previous five years.

If you fall into any of these categories, you will be required to calculate and pay the US Exit Tax.

How Is the Exit Tax Calculated?

When you relinquish your Green Card or US citizenship, the IRS assumes that you sold all your assets at fair market value a day before expatriation.
The capital gain from this deemed sale is then subject to US tax — after an exclusion amount (USD 821,000 for 2024).

Assets that may be taxed include:

• US and foreign real estate
• Stocks and mutual funds
• Retirement accounts
• Business holdings and partnerships
• Trusts and inheritance interests

For returning Indians, this means both Indian and US investments could be impacted — making tax filing and compliance guidance critical.

Exit Tax for Green Card Holders Returning to India

Many Indian-origin US residents who decide to revoke their Green Card to settle permanently in India are unaware that they may trigger the Exit Tax.

If you have held your Green Card for 8 out of the last 15 years, you are classified as a long-term resident, and surrendering your Green Card is treated as expatriation for tax purposes.

Before you start the process of returning to India, it is strongly advised to:

• Review your US and Indian tax residency status
• Get a valuation of your global assets
• Consult a cross-border tax specialist
• Plan your repatriation and remittance strategy

At Dinesh Aarjav & Associates, we specialize in guiding clients through these complex steps, ensuring tax-efficient transitions when moving funds from the US to India.

Key Exemptions and Relief Options

Certain individuals may avoid being labeled as “covered expatriates.” For example:

• Dual citizens at birth who have not lived in the US recently
• Minors who expatriate before the age of 18½
• Individuals who have complied with US tax filings and do not meet the net worth or tax liability thresholds

Proper documentation and prior planning are essential to qualify for these exemptions.

How Dinesh Aarjav & Associates Can Help

At Dinesh Aarjav & Associates (DAA), we provide comprehensive US-India tax consultation and filing services for individuals planning to:

• Revoke their Green Card and move back to India
• Manage US Exit Tax filing and compliance
• Plan repatriation of funds to India
• Avoid double taxation through DTAA
• Streamline cross-border financial reporting (FBAR, FATCA, Form 8854, etc.)

Our expert team of Chartered Accountants and international tax professionals helps clients mitigate tax exposure, ensure IRS compliance, and make the transition back to India seamless.

Conclusion: Plan Before You Exit

The US Exit Tax is complex and can significantly impact your wealth if not handled correctly.
Whether you are a US citizen giving up citizenship or a Green Card holder moving back to India, early NRI tax planning is the key to minimizing risks.

Reach out to Dinesh Aarjav & Associates today for a personalized tax consultation and expert guidance on exit tax, compliance, and repatriation planning.