International tax & NRI Bengaluru Answered

Moved back from the US in February 2026 after six years. What is my residential status for FY 2025-26 and 2026-27, and how are my 401(k) and RSUs taxed?

Asked by A business owner in Bengaluru 17 Aug 2026 1 answer 2 min read

The question

I returned to Bengaluru in February 2026 after six years in the US and joined an Indian company. I have a 401(k), some vested RSUs of my old employer, and a US bank account. For which year do I become an Indian tax resident and what do I have to report?
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1 answer

ERPCA
ERPCA Expert Desk Verified answer

Practising chartered accountants at ERPCA · 17 Aug 2026

In short

FY 2025-26: non-resident. You were in India for under 182 days, and the alternative test (60 days in the year plus 365 in the preceding four) fails because you were abroad for those four years. Only your Indian income is taxable for that year.

FY 2026-27: resident, but almost certainly "resident but not ordinarily resident" (RNOR), because you were a non-resident in nine of the ten preceding years. RNOR status typically lasts two years for a returnee. As an RNOR, income that arises outside India is not taxed in India unless it comes from a business controlled from India, and Schedule FA (foreign assets) in the return is required only for ordinarily residents. Once you become ordinarily resident, worldwide income is taxed and every foreign account, the 401(k) and the shares go into Schedule FA; missing it attracts a ₹10 lakh penalty under the Black Money Act, relaxed only for assets under ₹20 lakh.

401(k): withdrawals are taxed in the US; while RNOR they are outside Indian tax. After that, they are taxable in India with credit for US tax through Form 67 under the India–US treaty.

RSUs: shares that vested while you worked in the US were taxed there as salary. Selling them now gives you a capital gain in India once you are ordinarily resident (unlisted-in-India foreign shares: long-term after 24 months, 12.5%); while RNOR a sale on a US exchange is foreign income and outside Indian tax.

Next step

Inform your bank so NRE and NRO accounts are re-designated to resident accounts (you may open an RFC account for the US dollars), and keep a day-count record for each year; the RNOR window is where most returnees should sell or restructure foreign holdings.

General guidance on the facts given, not an engagement. Law as on the date of the answer.

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