According to tax expert Harshal Bhuta from P. R. Bhuta & Co. CAs, an individual who returned to India in July 2025 after working in the US for approximately 1.5 years would qualify as a tax resident in India for FY25-26, assuming they were present in India for more than 182 days during that period. Given the relatively short US stay, it is unlikely that the individual would satisfy the additional conditions to be treated as a resident but not ordinarily resident (RNOR). As reported by Mint, the tie-breaker test is also unlikely to operate in favour of the US, even if a permanent home and centre of vital interests could be demonstrated in both jurisdictions, as a 1.5-year assignment would generally be insufficient to shift habitual abode away from India.
As an ROR, the individual's global income is taxable in India, including not only income earned in India but also US employment income for the April–June 2025 period. According to Mint, such foreign salary must be computed in accordance with Indian tax provisions, irrespective of how it is treated under US tax law. Deductions allowed in the US will not automatically be available in India, with the deductions available under Indian income-tax law depending on the tax regime opted for. Under the new tax regime, only the standard deduction of ₹75,000 is generally permitted, with most other deductions being disallowed.
As reported by Mint, federal income tax withheld in the US can be claimed as a foreign tax credit (FTC) against Indian tax liability by filing Form 67 before submitting the return. While certain judicial precedents have permitted the deduction of mandatory foreign social security contributions, voluntary contributions such as 401(k) would typically not qualify. The technical explanation of the India–US tax treaty expressly clarifies that only federal income taxes are covered, and credit for other taxes such as state taxes or payroll taxes may not be available.
According to Mint, as an ROR, you will also be required to disclose details of your foreign assets, if any, in the Foreign Assets (FA) Schedule of your Indian income-tax return. The individual must ensure that all tax components from their US pay slip, including federal income tax, New York income tax, medicare tax, county tax, and social security tax, are properly accounted for in their Indian tax filing. This comprehensive approach ensures that all income sources are properly taxed and relevant deductions are claimed according to Indian tax regulations. For taxpayers with foreign assets, the new Income Tax Act, 2025 requires more detailed disclosures, including two addresses and two mobile numbers in the ITR forms. Donation reporting has become tighter with Section 80G claims now requiring payment reference details such as UPI, cheque or NEFT/RTGS number and bank IFSC.
The new Income Tax Return forms for Assessment Year 2026-27 introduce significant changes that affect all taxpayers filing returns on or before July 31, 2026. According to Taxmann research, the most notable update is the introduction of a separate field for secondary address, requiring assessees to furnish both primary and secondary addresses. Previously, ITR forms required disclosure of only one address along with two mobile numbers and two email IDs for communication purposes. Additionally, the existing fields for contact details have been redesignated as 'Primary' and 'Secondary' contact information. The new forms also remove the bifurcated reporting requirement for capital gains earned before or after July 23, 2024, as the rate changes were relevant only for the transitional period in Assessment Year 2025-26. For representative assessees, reporting requirements have been simplified to include only the representative's name, capacity, email ID, and contact number.
The new tax regime is now the default option under the updated Income Tax Act, 2025, with taxpayers needing to consciously opt for the old regime to claim deductions such as Section 80C, Section 80D, HRA or housing-loan benefits. Salaried taxpayers generally have year-to-year flexibility, but business and professional taxpayers face tighter switching rules. Taxpayers with foreign assets or foreign income must be especially careful, as details in Schedule FA, foreign bank accounts, overseas shares, RSUs, retirement accounts and foreign-source income must be reported correctly. Where foreign tax credit is claimed, Form 67 and supporting records such as tax deduction certificates, proof of payment, foreign tax returns and computation workings become crucial.
