Planning to move back to India: exit tax, final US return and what to close

Leaving the US does not end US tax automatically. How it ends depends on your status, and a plan made 12 months before the move is far cheaper than one made at the airport.

If you are on an H-1B or other visa

Your US residency ends when you leave and your substantial presence ends (generally the departure date, if you then have a closer connection abroad). The year you leave is a dual-status year: resident until departure, non-resident afterwards. Wages and capital gains in the part-year after leaving may be taxed differently, and the return is a 1040 with a dual-status statement, not a standard return.

Practical steps:

1. File Form 1040 for the year of departure (and a 1040-NR style statement for the non-resident part) and any state part-year returns.
2. Keep a US bank account to receive refunds and pay anything due. Closing everything on departure causes real problems if a notice arrives.
3. Forward your US address to someone you trust for IRS mail.
4. Tell your employer your departure date so the last pay and equity vests are handled correctly.

Green card holders and citizens: the exit tax

If you give up a green card that you held in at least 8 of the last 15 tax years (a "long-term resident"), or renounce citizenship, you may be a covered expatriate and subject to the exit tax. You are covered if you meet any one of:

• average annual US income tax liability for the last five years above a threshold ($206,000 for 2025, $211,000 for 2026)
• net worth of $2 million or more on the date of expatriation
• failure to certify five years of tax compliance on Form 8854

A covered expatriate is treated as having sold all worldwide assets at market value the day before, with a gain exclusion ($890,000 for 2025, $910,000 for 2026), and later gifts to US persons can be taxed. Most green card holders are not covered, but Form 8854 is still required, and not filing it can make you covered by default. Surrender the card on Form I-407 only with immigration advice. Simply leaving the country does not end the status.

Retirement accounts

• A 401(k) or IRA can stay in the US. Withdrawals while a non-resident have a 30% withholding unless the treaty reduces it, and early withdrawals before 59½ carry a 10% additional tax. A rollover to an IRA often makes more sense than cashing out.
• A Roth IRA's tax treatment in India is not settled (covered in the retirement and insurance article).
• Social Security benefits can be claimed from India; the India-US totalization agreement lets your credits combine.

India: the returning NRI

On return, you become a resident of India for tax. For the first years there is a helpful status called resident but not ordinarily resident (RNOR), which generally exempts foreign income not received in India from Indian tax. It can last up to two or three years depending on your stay history. Plan to bring money and settle your foreign accounts in that window, such as selling US investments or converting NRE accounts to resident accounts. Rules were restated in the Income-tax Act 2025 that took effect on 1 April 2026, so confirm the current provisions with an Indian adviser.

Schedule FA of the Indian return (the mirror image of US reporting) is not required in RNOR years. It applies in full from the first ordinarily resident year, when all foreign accounts, entities, property and other assets must be listed whether or not they produced income. Omissions can attract Black Money Act penalties (Rs 10 lakh per asset), so use the RNOR years to tidy up and plan.