Common DTAA Mistakes Made by NRIs?

Common DTAA mistakes made by NRIs are not filing Form W-8BEN with US brokers to reduce withholding (30% to 15%) or missing the tie-breaker declaration when both countries (India and the US) claim residency.

What FBAR Headaches do NRIs Face?

FBAR headaches that NRIs face are mandatory FinCEN Form 114 for foreign (Indian) accounts >$10k aggregate; automatic $10k+ penalties for non-filing, sometimes even zero balances.

How are NRI Indian Income Taxes in the US?

In the US, the global income of the residents is taxable, including Indian salary/ rent, and capital gain as foreign income in Form 2555. In this, exclusion is possible.

State Tax Compliance For NRIs?

State tax compliance in the US for NRIs includes multi-state sourcing (CA/ NY high rates). Additionally, the allocation of Indian income has no DTAA benefits available at the state level.

Why do NRIs Miss US Tax Deadlines?

NRIs miss US tax deadlines due to complex tax residency rules, underestimating reporting for foreign accounts, confusion over separate India/US tax obligations, forgetting required forms like 8843, misunderstanding extension like payment vs. filing, and procrastination.

US Tax Filing and Compliance

Common Challenges Faced by NRIs While Filing US Tax Returns

By Varun Gupta |Last Updated: January 28, 2026

Being an NRI, navigating the US tax laws can be overwhelming. It has become a most important concern for people. However, with the right NRI filing US tax return guidelines, while maximizing tax benefits, you can ensure compliance.

To help you out, this blog consist the common challenges faced by NRIs while filing US tax returns, along with the tips to avoid them. So read on and gather all the information about it.

Varun Gupta(Tax Expert)

Mr Varun is a tax expert with over 13 years of experience in US taxation, accounting, bookkeeping, and payroll. Mr Gupta has not prepared and reviewed over 5000 individual and corporate tax returns for CPA firms and businesses.

Frequently Asked Questions

The biggest residency challenge for NRIs in the US taxes is triggering the US tax residency accidentally by miscalculating days under the Substantial Presence Test (SPT). It leads to complex dual-filing requirements and global income taxation, specifically during mid-year moves, complicating compliance with both Indian and US tax laws.

US residency conflicts with Indian NRI status by creating dual tax residency, where you meet the tax residency criteria in both India and the US in the same year. However, you can avoid this with the India-US DTAA's tie-breaker rules. It is based on the center of vital interests, permanent home, nationality, or habitual abode. It determines your single resident country for tax purposes, avoiding double taxation.

NRIs file wrong US tax forms by misunderstanding their residency status in the country, like SPT, getting confused with different reporting requirements (FATCA vs. FBAR), failing to report global income, and overlooking the US-India tax treaty benefits. Additionally, often, depending on inadequate tax preparation, unfamiliarity with cross-border rules leads to filing wrong US tax forms.

1040 (residents), 1040NR (non-residents), 111 (foreign tax credit), Schedule B (foreign accounts), and FBAR (FinCEN 114 if >$10k abroad) are the common forms that US-based NRIs generally fill.

NRIs can avoid US-India double taxation by claiming the Foreign Tax Credit (Form 1116) for taxes paid in India; US-India DTAA limits the US taxes on income sourced from India, i.e., interest and dividends.

Common Challenges Faced by NRIs While Filing US Tax Returns

Frequently Asked Questions

What is the biggest residency Challenge for NRIs in US Taxes?

How Does US Residency Conflict With Indian NRI Status?

Why Do NRIs File Wrong US Tax Forms?

Which Forms Do US-Based NRIs Commonly Need?

How do NRIs Avoid the US-India Double Tax?

Common Challenges Faced by NRIs While Filing US Tax Returns

Frequently Asked Questions

What is the biggest residency Challenge for NRIs in US Taxes?

How Does US Residency Conflict With Indian NRI Status?

Why Do NRIs File Wrong US Tax Forms?

Which Forms Do US-Based NRIs Commonly Need?

How do NRIs Avoid the US-India Double Tax?