Can an NRI Be a U.S. Tax Resident and Indian Tax Resident at the Same Time?

Yes, it's possible for an NRI to be a U.S. tax resident and an Indian tax resident in the same year. Tax residency is determined primarily under each country's tax rules. Citizenship, immigration status, physical presence, and other facts can all matter depending on the country and the specific rule being applied. Instead, both the U.S. and India use different rules to decide who is treated as a tax resident. So, you might meet the residency requirements of both countries during the same year even without intending to.

For U.S. citizens, green cardholders, NRIs returning to India, and individuals who spend significant time in both countries, this situation can be particularly important. One easy example of this is a green cardholder moving back to India, becoming an Indian tax resident while remaining a U.S. tax resident. It's because the individual still holds a green card; they are a US tax resident, and, based on the number of days spent in India, they also become an Indian tax resident.

Dual residency doesn't automatically make you liable to pay tax twice on the same income. However, it does increase your reporting and tax-filing requirements. Also, there are various tax rules that can help reduce the risk of double taxation, based on your situation.

In this blog, we will understand how the U.S. and India determine your tax residency, when you may face dual tax residency, what requirements you may face, and the benefits you can claim.

Why Can You Be A Tax Resident of Two Countries?

An individual being a tax resident of two countries in the same year is very simple in logic. So, both the US and India follow their own approaches and rules for determining who counts as a tax resident. When both countries' tests were written, the other country was not taken into account. Also, there is no specific rulebook that forces the countries to follow the same set of rules.

Therefore, it's completely normal for an individual to be a tax resident of two different countries in the same year. It means being a US resident under US rules and a resident of India under India's tax residency rules in the same year. There's nothing to be stressed about, and it's not rare.

However, another important point arises: both countries use different rules to determine your tax residency. It's important for you to understand these rules. That being said, let's now learn how both countries determine your tax residency.

How Does the U.S. Decide Your Tax Residency?

If you are not a U.S. citizen, you will face two important tests to determine your eligibility for U.S. tax residency:

• Green Card Test
• Substantial Presence Test

Let's look at both tests in detail.

1. Green Card Test

Generally, a lawful permanent resident who holds green-card status at any time during the calendar year is treated as a U.S. tax resident under the Green Card Test, unless the status has been properly abandoned or otherwise terminated.

Let's look at an example to make the green card test easier to understand.

2. Substantial Presence Test

In addition to holding a green card, you can become a U.S. tax resident based on the number of days you spend in the U.S. This is known as the substantial presence test, which considers your physical presence in the U.S. over a three-year period.

To meet this test, you generally need to be present in the U.S. for:

• At least 31 days in the current year, and
• At least 183 weighted days over the current year and the two preceding years.

So, it's calculated by considering all the days in the current year along with:

• 1/3 of the days in the previous year
• 1/6 of the days in the second previous year

If, after calculating all this, your number of days is 183 days or more, you will meet the substantial presence test and be treated as a U.S. tax resident.

*Point to Note: Remember that certain types of U.S. presence may get some exceptions and special rules.

Let's now look at an example to make the substantial presence test easier to understand.

You need to meet the requirements of either the green card test or the substantial presence test to be considered a tax resident of the U.S. Next, we will learn about how India determines your tax residency.

How Does India Decide Your Tax Residency?

India primarily uses day-count rules to determine whether an individual is a resident for tax purposes. It means the country considers the number of days you spend there in a year. Also, the basic residency conditions under the Income Tax Act 2025 largely remain the same.

So, generally you will be considered an Indian tax resident if you:

• Stay in India for 182 days or more during the relevant tax year, or
• Stay in India for 60 days or more during the relevant tax year and 365 days or more during the preceding four years. However, this is subject to special rules and exceptions.

Another key point is that certain Indian citizens and persons of Indian origin visiting India may be subject to additional rules. These may include special day-count rules based on factors such as income and whether the individual is responsible for paying tax in another country.

It basically means that you can't simply say that I am an Indian resident because I spend about half the year there. This is not right. You must ensure you review your specific situation and the applicable residency rules rather than assuming everything on your own.

It's pretty common for anyone to be confused about whether this situation is rare or common. Let's clear this confusion.

Is Dual Tax Residency a Rare or Common Situation?

If you've faced this situation, don't worry; it's very common. If you hold a green card and you move back to India, you will face this situation immediately when you meet India's day count test. It basically means simply not using the green card will not end your obligation on the U.S. side.

The same rule applies to those who meaningfully split time between both countries in a single year.

In short, if you have tax residency in both countries, you don't need to worry. Instead, you must understand your obligations and ensure compliance. Next, we will understand what happens when you become a tax resident in both countries.

What Happens If You Are a Tax Resident of Both Countries?

Firstly, if you come across this situation, don't panic. Dual tax residency is neither illegal nor a mistake. It's simply a situation that can easily be handled by understanding your obligations and requirements.

So, once you qualify as a tax resident of both the U.S. and India in the same year, you may face tax filing and reporting obligations in both countries. However, this doesn't necessarily make you liable to pay tax twice on the same income. There are various mechanisms and rules that can reduce double taxation in certain situations, such as the U.S.-India tax treaty and the foreign tax credit.

Moreover, the exact treatment will vary based on your income, residential status, citizenship, green card status, and the number of days you spend in each country. In easy words, once you become a dual tax resident, you may become liable to do the following things:

• File tax returns in both countries (if required).
• If you are a U.S. citizen or U.S. tax resident, report your global income there.
• Based on your Indian residential status, report taxable income in India.
• Check whether the U.S.-India tax treaty affects your residency or taxing rights.
• If allowed, claim a foreign tax credit for eligible taxes paid in another country.
• Stay compliant with additional foreign account and complete asset reporting forms (if applicable).

To keep it short and simple, let's use an example.

Lastly, let's look at a quick checklist that will help you determine whether you are a dual tax resident.

Check Your Own Status With This Quick Checklist

Consider the following questions and check whether your answers match to determine whether you also fall under the dual tax residency status:

• Are you a U.S. citizen? If so, you will always be treated as a U.S. tax resident, regardless of where you live.
• Do you have a green card that you haven't formally abandoned or terminated yet? If so, the answer will remain the same as the first point.
• Did you spend a significant amount of time in the US this year and the two years before it? Check by using the specific day-count formula.
• Did you spend 182 days or more in India during the relevant tax year? If not, check whether another residency test, such as the applicable 60-day/365-day test or a special rule, makes you a resident.

After reading the questions, if you answered yes to both a US test and India test for the same period, you'll likely be treated as a dual tax resident for that year. If you are still not sure, you can confirm your status with a professional.

To Conclude

You must now have understood that it's very common to be a tax resident of both the US and India in the same year. It most commonly happens to green card holders, US citizens living in India, and people who spend significant time in both countries. Although it doesn't automatically make you liable for paying tax twice, it does create additional filing and reporting requirements.

You can reduce the risk of double taxation by claiming benefits under various treaties, such as the US-India tax treaty, the foreign tax credit, and other provisions. However, it's important to review your residency status every year, as your situation and the number of days spent in each country can affect it.

Moreover, if you are unsure about your residency status and need help, contact an expert at Savetaxs. We have a team of experts who can help you determine your residency status, understand treaty rules, claim a foreign tax credit, and file taxes in India and the US. Connect with us right away to stay compliant and avoid the risk of double taxation.