This guide explores tax-efficient strategies to minimize lifetime taxes, maximize post-tax returns, and navigate US estate tax rules.

📚 Table of Contents

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• Which are the most common accounts in the US that will require conversion to Return to India?
• How can you minimise lifetime taxes on your US investments vs. bring them to India?
• How does residency status impact your portfolio when returning to India from the US?
• What is the impact of US estate tax rules on NRI portfolios once they return to India?
• What is the impact of Rupee depreciation vs the USD on the plans of bringing US assets to India?
• Which market has higher returns between the US and India?
• How to deal with your US accounts when you return to India?
  • 401k, Traditional or Roth IRAs
  • Brokerage accounts
  • Social Security
  • 529 Education Savings Plans
  • Health Savings Accounts (HSAs)
  • US bank accounts and Certificates of Deposit
  • Loans in the US: mortgages, credit card debt, car and student loans

Which are the most common accounts in the US that will require conversion to Return to India?

• 401(k) or Other Employer-Sponsored Retirement Plans: these are standard retirement plans offered by US employers.
• Individual Retirement Accounts (IRAs): Including both traditional and Roth IRAs, these are used for investing for retirement beyond employer-sponsored plans.
• Brokerage Accounts: This includes accounts for investing in shares, ETFs, and mutual funds beyond the retirement accounts.
• Secured and Unsecured Loans: Mortgage, Credit card, Car and Educational loans come under this category.
• Checking and Savings Accounts: For day-to-day financial transactions.
• 529 Education Savings Plans: Common among NRIs with children, for future education expenses.
• Health Savings Accounts (HSAs): These are used to save for medical expenses in a tax-free manner
• Certificates of Deposit (CDs): Fixed-term investments offered by most banks like Fixed Deposits (FDs) in India

Apart from these, we will also explore the options of dealing with Social Security and Real Estate when returning to India.

We will measure the effect of these accounts on the following considerations:

• Minimise lifetime taxes (as per known tax laws) in both India and the US.
• Maximise post-tax lifetime returns on the portfolio (including social security payments and real estate)
• Explore the options of withdrawing fully, partially, over time or not at all when coming back to India
• Look at the impact of residency status: H1B holder (or equivalent), Green Card holder or US Citizen at the time of returning
• Impact of IRS estate tax laws on total assets depending on residency status
• Effect of INR depreciation vs. the USD over the next few decades
• Whether there are goals to be funded in USD (e.g., Ivy League college degree for children) or all goals are in INR (retirement, real estate, travel, and lifestyle in India)

In the absence of a crystal ball, we need to set up some thumb rules based on what we know today and extend that based on reasonable expectations based on past trends.

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How can you minimise lifetime taxes on your US investments vs. bring them to India?

The cornerstone of minimising taxes on future US and Indian income is the India-U.S. DTAA.

The next input on understanding taxes is future tax slabs and rates at the time of withdrawal in either country. In general,

• Capital gains are taxed differently compared to normal income
• Tax slabs are progressive with higher incomes being taxed at increasing rates (and vice versa)

Currently, capital gains are taxed at 12.5% and onwards in India and are generally favourable to normal income tax rates for investors in the highest slab rates (30% or more). However, the New Tax Regime in India allows tax-free income up to ₹12 lakhs (for non-salaried) which implies that even ordinary incomes, say via FD interest and dividends can be tax-free for significant capital amounts.

Given that tax rates in the US are progressive, future withdrawals from say a 401k can happen at lower rates vs current slab rates at the point of returning to India. While we don’t know what the tax rates will be in the future in either country, these are reasonable assumptions based on what we know today.

How does residency status impact your portfolio when returning to India from the US?

We will cover these three main groups:

• H1B/equivalent: does not impact taxation beyond the simple residency tests in both the US (e.g., the substantial presence test) and India (NRI to RNOR to resident)
• Green card holders are, from the taxation perspective, the same as US residents. This is also true if you pass the Substantial Presence Test even if you do not hold a green card
• US Citizens, irrespective of their country of birth and present location, are taxed on their worldwide income

What is the impact of US estate tax rules on NRI portfolios once they return to India?

Here it is important to understand the nuance of domicile vs residency.

• residency is relevant to income tax
• domicile applies to estate tax

Domicile status depends on factors such as the amount of time spent in the US vs elsewhere, intentions regarding staying in the US vs leaving and other factors.

Threshold	U.S. Citizen (Yes)	U.S. Citizen (No)
U.S. Domiciliary	$13.99 mn	$13.99 mn
Non-U.S. Domiciliary	$13.99 mn	$60,000

An NRI who has come back to India has to apply the above table to their circumstances to understand the estate tax applicable to them. The calculator below shows the effect of the federal estate tax on your US-situs assets.

What is the impact of Rupee depreciation vs the USD on the plans of bringing US assets to India?

Apart from the tax considerations discussed so far, there is also the question of the impact of currency movements on the returns on various investments based on their location.

For example, from 2005 to 2025, the Indian Rupee has gone from ₹43/$ to ₹86/$ or around 3.6% depreciation per year. If we assume even half that depreciation rate, the rupee will reach around ₹100+/$ in another ten years.

For all things remaining equal, every additional $1,000 deferred while bringing back to India is therefore worth more in rupees. We cannot assume that returns in the US in different asset classes will be comparable to the same asset classes in India. Even if we assume that the stock market in India gives higher returns than that in the US, after factoring in the rupee depreciation, the returns will be lower than expected.

Which market has higher returns between the US and India?

10Y CAGR	India	US
Equities	12.39%	11.07%
Debt	7.83%	-0.35%
Gold	10.17%	8.15%
Real Estate	3.62%	6.90%

Rupee depreciation over this period is around 3.07% a year on an average.

These are point-to-point average returns from 2015-2024 for:

• India: Equity - MSCI India, Debt - Gilts, Gold - INR gold price, Real estate - NHB Residex
• USA: Equity - S&P 500, Debt - iShares 7-10 Year Treasury Bond Index, Gold - USD gold price, Real estate - Case-Shiller U.S. National Home Price Index

We need to keep in mind that these are average returns. There will always be pockets (e.g. in Real Estate) where returns will be dramatically higher (or lower). But if you aggregate the returns from say 10,000 investors, they will converge to the numbers above.

Equities have been a clear winner in India at an asset class level. The case for equity investments in India using mutual funds is extremely straight-forward in India as shown below for SIP investments:

Category	Any 5Y	Any 10Y
Equity: Large Cap	15.49%	14.16%
Equity: Mid Cap	20.88%	16.83%
Equity: Small Cap	28.26%	21.87%

Related:
India vs. US: Where Should NRIs Invest for Maximum Returns?

How to deal with your US accounts when you return to India?

401k, Traditional or Roth IRAs

Account Type	Tax on Investments	Tax on Growth	Tax on Withdrawal
401k	Pre-tax contributions	Tax-deferred	Taxed as ordinary income
Traditional IRA	Pre-tax contributions (if deductible)	Tax-deferred	Taxed as ordinary income
Roth IRA	Post-tax contributions	Tax-free (if qualified)	Tax-free (if qualified)

There are three options for dealing with a 401k:

• Full withdrawal: this will be taxed in the US first (income tax plus 10% penalty for early withdrawal) and then in India (with DTAA-supported foreign income tax credit). Ensure that you file your tax return in the US whether or not taxes have been withheld (like a TDS) before crediting you the amount
• No withdrawal until 59½: taxed as ordinary income in the US. If your employer does not support you continuing, then you need to either rollover into an IRA (Traditional or Roth) or withdraw
• Rollover: Find a traditional IRA provider who supports investing outside the US and roll over to them. Otherwise, you find a similar Roth IRA provider, pay tax (since a Roth is funded with post-tax dollars) and roll the 401k into it. In the future, you can withdraw from the Roth tax-free (up to the contributions made into it) and pay tax on the rest on withdrawal presumably at lower future tax brackets in the US

Note: Monthly pension after 59½ is taxed in the US first with a foreign tax credit available under DTAA when filing ITR in India. Be wary of estate tax whenever leaving large amounts behind in the US.

When dealing with Roth IRAs remember the twin 5-year rules:

• each conversion into Roth can avoid the 10% early withdrawal penalty only if 5 years (from 1st January of the year of conversion) have passed
• tax and penalty-free withdrawals are possible only if the Roth account itself is at least 5 years old (same 1st Jan rule) and you are more than 59½

Brokerage accounts

Unless you plan to sell off all the contents in your brokerage account and pay the requisite tax, you can keep some of the contents. Once you leave the US, it is important to inform your broker about the change in your residency status via Form W-8BEN. Some brokers do not support foreign nationals to hold a US brokerage account. If you are selling off some of the stocks, it is important to sell off any positions with losses and offset those against profitable positions.

Social Security

It is possible for Indian citizens with the required accumulated 40 credits to get Social Security sitting out of India. You can create an account on the SSA website to check your eligibility. You can choose to defer payouts until age 70 to get the maximum benefits.

529 Education Savings Plans

Account Type	Tax on Investments	Tax on Growth	Tax on Withdrawal
529 plan	Post-tax contributions	Tax-free	Tax-free (if qualified)
HSA (only if HDHP is in place)	Pre-tax contributions	Tax-free	Tax-free (if qualified)

529 plans are tax-free as long as they can be used for qualifying educational expenses either in the US or in eligible foreign institutions (which participate in US Federal Aid programs). However, if used for purposes apart from college expenses might lead to the removal of tax benefits with a 10% additional penalty. If there are any plans for children going for higher education in the US, then 529 plans should be left as is.

Health Savings Accounts (HSAs)

HSAs exist when your insurance premiums are so high that you are forced to take up High Deductible Health Plan (HDHP) and then can save for future medical expenses in the HSA to fund that high deductible.

Just like the 529 plan, HSAs can be used tax-free if a withdrawal is needed to fund a qualified medical expense even when outside the US. It is just that you can no longer contribute if you are no longer in the HDHP plan which would be the case when you leave your US employment. Early withdrawals are taxed as ordinary income in the US with a 20% penalty.

Note: All the tax discussion so far is about Federal taxes in the US. Some US states might have their own taxes on withdrawal which would vary from state to state.

US bank accounts and Certificates of Deposit

It is easier to keep on bank account in the US if you plan to receive dividends from brokerage accounts, rental income or pension payments. You need to of course fund a low-cost bank which supports non-resident customers and online transactions. Any US bank accounts must of course be reported both in your US and Indian tax returns.

Loans in the US: mortgages, credit card debt, car and student loans

Being legal obligations, you cannot walk away from loans. Therefore, you need to either pay them off before leaving the US. This might require finding a bank in India which allows you to negotiate foreign exchange rates for such recurring payments.