Year Before Returning to India — Tax Planning Checklist

Why this year matters

The 12 months before your move to India are the highest-leverage tax-planning window of your life. Decisions now affect your tax for next 3-5 years.

The big decisions

1. Time your residency change

Optimal date depends on:

• Indian residential status (RNOR window optimization)
• US capital gains positions to recognize before move
• Pending RSU vesting events
• US tax-loss harvesting opportunities

Leave by September 30 → likely Indian resident for that FY under 60+365 rule. Leaving October 1+ usually makes you Indian non-resident for that FY.

2. RSU and ESOP acceleration

If unvested RSUs/ESOPs:

• Acceleration before move → US-only taxation
• Vesting after move → split or India-only depending on workday allocation

Some companies allow earlier exercise/sale. Check.

3. Sell appreciated US investments

If in low Indian tax brackets post-move (or RNOR window):

• Selling US investments BEFORE move → US capital gains, possibly better US rate
• Selling AFTER move → US LTCG (if GC retained) AND Indian LTCG, double-tax via FTC

4. Green Card surrender timing

• Surrender BEFORE move → US non-resident from departure, simpler US filings
• Surrender AFTER move → continue US worldwide income reporting until surrender
• Surrender NEVER → US worldwide income reporting forever

5. Liquidate Indian mutual funds

If still US person at move date:

• PFIC reporting (Form 8621) continues post-move
• Compliance burden grows
• Better to liquidate before becoming US tax non-resident (if applicable)

6. Pre-pay major US expenses

Pre-pay expenses while still have US tax deductions (property tax, charitable contributions). Limited use under TCJA but still relevant for itemizers.

7. Convert 401(k) to Roth (or not)

If surrendering GC and have low US bracket year:

• Convert traditional 401(k) to Roth — taxed at low rate now, tax-free withdrawals later
• Roth withdrawals not US-taxable post-surrender

If keeping GC:

• Roth conversion logic depends on India treaty Article 20

8. Plan Indian-side accounts

Pre-move:

• Open NRO account (if not already)
• Plan NRE/FCNR handling
• Coordinate with Indian CA

Post-move:

• Re-designate NRO to resident accounts (within 90 days)
• New PAN / Aadhaar updates

9. RNOR window strategy

RNOR for ~2-3 years post-return. Use it:

• Sell remaining US investments — Indian tax-free under RNOR
• Draw down 401(k) — Indian tax-free under RNOR
• Receive inheritance — RNOR may keep it Indian tax-free

After RNOR ends (ROR): Worldwide income is taxable in India

10. Document everything

• Airline tickets, US lease termination, Indian residence proof
• Final 401(k) statement, RSU vest schedule, US bank closing statements
• US tax return for year of move + FBAR
• Indian tax return for first year as resident/RNOR

Common pre-move planning mistakes

• Not optimizing RNOR window ($50K-$200K missed opportunity)
• Surrendering GC without exit tax modeling
• Selling appreciated Indian shares post-move (now Indian + US tax)
• Leaving Indian MFs unsold (continuing PFIC burden)
• Forgetting to re-designate NRO to resident accounts

Recommended timeline

When to engage us

Ideally, 12-18 months before the move. Modelling exercises take time, and decisions are time-sensitive.

Explore our complete US Tax Return Guide to understand refunds, filing rules, and IRS procedures for NRIs.