Moving from the US to India Tax Checklist: Dual-Status Year, RNOR and NRI Accounts

A moving from the US to India tax checklist has two deadlines running at once: the U.S. wants a clean exit return and proof that your U.S. residency has ended, while India wants you to classify yourself correctly the moment you come back, because that decides how much of your foreign income it can tax. Returning NRIs from Aurora, Naperville and the rest of the Fox Valley often get the Indian side right and miss the U.S. exit steps, or the reverse. The checklist below covers both, for H-1B and L-1 holders as well as green card holders who are going home.

Moving from the US to India tax checklist: Step 1, end U.S. residency on the right date

Under IRS Publication 519, your residency termination date is December 31 unless you qualify for an earlier one. For the substantial presence test, the earlier date is the last day you are physically in the U.S.; for the green card test, it is the first day you are no longer a lawful permanent resident. You can use it only if, for the rest of the year, your tax home was in a foreign country and you had a closer connection to it. You must file a statement with the IRS to establish the date. Publication 519 also notes that most departing aliens must obtain a certificate of compliance (a sailing or departure permit) on Form 1040-C or Form 2063 from an IRS Taxpayer Assistance Center, at least two weeks but no more than 30 days before leaving, unless they fall in an exempt category such as certain students on F-1 or J-1 visas. Ask your CPA whether your visa category is exempt.

Green card holders have extra steps. Giving up a green card is an immigration act, and a "long-term resident" (a green card holder for at least 8 of the last 15 tax years) who ends residency may face expatriation tax filings on Form 8854. Publication 519 also warns that using a treaty tie-breaker to become a nonresident can trigger those rules. Speak to an immigration attorney before you sign anything.

Step 2: File the final U.S. return

• A year in which you are a resident part of the year is a dual-status year. You cannot use the standard deduction, cannot use head of household rates and cannot file jointly, with narrow exceptions.
• With wages subject to withholding the due date is April 15 of the next year; without wages, June 15.
• A U.S. citizen or green card holder who keeps the status keeps filing Form 1040 on worldwide income; see our US India tax treaty guide.
• After departure, U.S.-source income such as dividends or rent is taxed under the nonresident rules; see nonresident FDAP and ECI.
• Illinois asks whether you remain domiciled there. The IL-1040 instructions treat residence in a foreign country as a temporary absence if you intend to return to Illinois, so document that you are leaving permanently.
• If you sell a U.S. home, tell your title company early about your status change; withholding rules for foreign sellers can apply to the sale proceeds.

Step 3: Decide what to do with U.S. accounts and retirement plans

1. Keep at least one U.S. bank account active for refunds, final W-2 corrections and 1099s.
2. Leave 401(k) and IRA balances alone until you have modelled the tax. A distribution to a nonresident is generally subject to U.S. withholding. The treaty's pension article (Article 20) can reserve tax on periodic pension payments to the country of residence for someone who is not a U.S. citizen or resident; lump sums are less certain.
3. Note that there is no U.S.-India totalization agreement, so U.S. Social Security credits and Indian provident fund balances are not combined.

Step 4: Classify yourself correctly in India

The Income Tax Department's FAQ lays out the Indian tests: resident with 182 days or more in the year, or 60 days or more plus 365 days in the four prior years. A returning NRI usually meets one of them in the year of return. You are "not ordinarily resident" (RNOR) if you were non-resident in 9 of the 10 preceding years, or in India 729 days or fewer in the preceding 7 years. The same rules continue under the Income-tax Act, 2025, which applies to tax years beginning on or after April 1, 2026; stays in earlier years still count for the look-back tests. Our India residency guide explains the tests, and the Act 2025 transition guide explains the dates.

While you are RNOR, India generally taxes income earned or received in India, not most foreign income, but exceptions exist, so your Chartered Accountant confirms what applies. A resident other than an RNOR must complete Schedule FA for foreign assets held during the calendar year, while an RNOR or non-resident does not.

Step 5: Re-designate Indian bank accounts

The RBI FAQ says NRE accounts should be designated as resident accounts, or funds moved to a resident foreign currency account, immediately on return for employment or change of residential status. FCNR (B) deposits may continue to maturity, and NRO accounts can become resident accounts when you return intending to stay. See NRE, NRO and FCNR accounts.

Step 6: Check FADS 2026 and Schedule FA exposure

If you returned in earlier years and never disclosed foreign assets (for example a U.S. brokerage account built up while you were non-resident), note the Foreign Assets of Small Taxpayers Disclosure Scheme, 2026. The Income Tax Department's Form 1 manual shows filing from August 16, 2026 to December 31, 2026. One category covers assets acquired from foreign income while non-resident but not declared on becoming resident, up to Rs 5 crore in aggregate, for a flat amount of Rs 1 lakh. The other covers undisclosed foreign assets or income up to Rs 1 crore at 30% tax plus an equal additional amount. It addresses India only, not U.S. filings. Whether you qualify is for your Chartered Accountant to decide.

Worked example

Rohan, an H-1B worker in Naperville for six years and not a green card holder, moves to Pune on September 1, 2026. He establishes that his tax home and closer connection moved abroad and files a statement for a residency termination date at the end of August. For 2026 he files a dual-status return, itemizing deductions, due April 15, 2027. In India, he is in the country for 212 days from September 1 to March 31, so he is resident in the Indian year, but he was in India fewer than 730 days in the prior seven years, so he is RNOR. His NRE accounts become resident accounts on arrival. All dates are hypothetical.

Mistakes to avoid

• Assuming that a flight date automatically ends U.S. residency for tax purposes.
• Cashing out a 401(k) in the departure year without modelling withholding.
• Leaving NRE accounts running after becoming resident.
• Skipping Schedule FA when you are a resident but not RNOR.

How we can help

We handle the U.S. side of a move to India from our Aurora, Illinois area base: the residency termination statement, the dual-status return, retirement and brokerage account planning, and any FBAR or Form 8938 filings you still owe. We coordinate with your Indian Chartered Accountant, who handles RNOR status, Schedule FA and any FADS decision. See our relocation and immigration tax planning and cross-border tax services. We do not give immigration advice.

Frequently asked questions

General information only. It is not tax, legal, accounting or immigration advice for your situation, and rules change; confirm the current rules with the official source or a licensed professional in the relevant country.