Filing State vs. Federal Taxes from India: What NRIs Must Know in 2025

Introduction

With more Indians going to the United States for education, work, or to settle there permanently, the number of people coming back to India while still carrying U.S. citizenship or Green Cards has grown significantly. However, the fact that moving to India does not release them from their U.S. tax obligations is what many NRIs (Non-Resident Indians) fail to comprehend. If you are residing in India but still recognize the U.S. as your country by citizenship, permanent residency, or have financial ties—correct tax filing is very important.

The U.S. taxation system is quite different from others because it operates on a citizenship-based taxation system. This implies that even if you are an Indian resident, you will probably still need to submit your federal—and, in certain cases, state—income tax filings to U.S. authorities. To start with, here we will differentiate federal and state tax filings for NRIs and then go on to describe what can be expected in the tax year 2025 and how one can observe compliance when abroad.

This comprehensive guide, which is compiled by the experts of Accelero Corporation, can offer you a clearer picture of your tax responsibilities and help you explore different solutions, if that is what you wish when handling taxes between the US and India.

The Basics: Federal vs. State Taxes

The United States has a dual taxation system—federal and state taxes. If you are a US citizen or resident who lives in another country, you still have to file a federal tax return with the IRS if your income is over the minimum amount. The IRS requires you to report your income from all countries.

On the other hand, state taxes depend on your residency or where you get your income. Some states, like Texas or Florida, do not collect income tax from their residents. However, states such as California, New York, or New Jersey are very strict with tax collection, even if you live abroad. You can save a lot of money and avoid unnecessary trouble with the law if you understand your state tax residency status correctly.

Common Scenario: Green Card Holders and Long-Term Residents

Tax obligations in the U.S. for Green Card holders do not get extinguished just because you have relocated to India. You are still considered as a U.S. person for tax purposes and thus obliged to submit a federal tax return every year. It is possible that you also need to submit state returns if you have not definitely severed your ties with your previous state of residence.

The most frequently misinterpreted fact among the public is that the local tax authorities are not always in direct correlation with the federal agencies in the implementation of the residency guidelines. Accordingly, you could be a non-resident according to the IRS but a resident of your previous state as far as its local tax office is concerned if you haven’t taken the necessary steps to end your residency there. Until now, Accelero Corporation has been instrumental in implementing innumerable actions in the relief of NRIs—especially Green Card holders—who have to deal with such burdensome situations.

Federal Tax Filing: Requirements from India

Being an NRI means that you are required to report your global income in your U.S. federal tax return. This includes:

• Indian salary

• Rental income

• Interest earned on Indian bank accounts

• Capital gains

• Dividends

You are eligible to claim a foreign tax credit to offset the same income you reported in both countries. For instance, you may be allowed a credit when filing your U.S. federal taxes if you have already paid the tax on the Indian income. It is exactly at such points that services like India Foreign Tax Credit in Hyderabad become highly relevant for expatriates who want to be on the right track with their liabilities.

Besides, you should send the informational reports on foreign countries:

• FBAR (Foreign Bank Account Reporting)

• FATCA (Foreign Account Tax Compliance Act)

Consequences of not fulfilling the requirements can be

State Taxes: When and Why You Might Still Owe

Many NRIs wrongly believe that just because they have moved to India, they have completely cut off all connections with their home state's tax department. However, the reality is quite different.

California is an example of a state that employs a "domicile" test rather than a traditional "residency" test. If you continue to have a property, voter registration, or even a driver's license in that state, you may be considered a resident for tax purposes, even without actually residing there.Some major measures that are required to be done in order to break the state residency are:

• Dispose of your U.S. property or lease it out.

• Stop using your car legally and take away your driver's license.

• Close any bank accounts or credit cards that are linked to an address in the U.S.

• Inform tax and postal authorities that you have changed your address.

• Any of these actions not being done might result in state tax authorities

The Importance of Professional Guidance

Since the tax codes of federal and state are complicated and there are also major differences, it is better to avoid relying only on generic tax software or a do-it-yourself approach.

That is exactly why you need the Expat Tax Services provided by the Accelero Corporation. The brains of their team of experts are around-the-clock assistance at your service, providing compliance with government regulations, and at the same time, they save your tax liability through strategic tax planning instruments such as tax treaties, foreign earned income exclusions, and FTC.

If you are a USA Tax Filer In India Green Card Holder or a U.S. citizen that is going back from India, Accelero is at your side, making sure that your documents are packed properly, your taxes are paid before the deadline, and that you have a stress-free mind.

Final Thoughts

The year 2025 will see U.S. tax rules going on from the point where they left off in the last year, being very strict with expatriates and imposing even tougher fines for those who do not comply. It is more important than ever for NRIs living in India that you come to terms with the difference between federal and state tax filing obligations.

The representatives of Accelero Corporation are there to help you handle your cross-border taxes without any troubles, whether it is unpacking complex tax treaties or ensuring that both returns are correctly filed. Their team is equipped with necessary knowledge and resources to remain compliant and assured.

Don't wait till the IRS or a state revenue office sends a letter. Take care of it now and be on top of your tax duties in 2025 because when the matter is global taxes, going first beats going after.

Allow Accelero to be the reliable companion on your trip—providing professional service, openness, and satisfaction. If your requirements are for filing USA INDIA Taxes, FATCA, FBAR, or any other matter similar, you definitely have someone to back you up.